4.3.1. Operating Measures

The sector-wise panel regression in Appendix A reveals a strong positive relation between the tangibility of assets (TANG) and the dividend policy for firms from the AGRO, MINING, ENGG, TEXTILE, CONSGDS, CONSTR, and LOGIS sectors. This implies that the companies in these sectors tend to pay dividends if they have higher TANG, in line with past studies e.g., (Aivazian et al. 2003a; DeAngelo et al. 2004; Denis and Osobov 2008; Subhash Kamat and Kamat 2013). However, TANG has an inverse relation with dividend policy for firms of the BANKING-sector.

The business risk variable displays inconsistent signs. Although we find that it is inversely associated with dividends in the CONSTR, BANKING, and S-OTHS sectors, their importance is opposite in the ITTEL and FINSER sectors. This variable is found to be insignificant in the remaining sectors. A possible explanation for this is that all sectors are exposed to risks that are pertinent to their line of business and sector-specific regulations in which they function. Aivazian et al. 2003a also report mixed results for the business risk variable when comparing the dividend policy of the United States with emerging market firms.

For the scale of operations as measured by the log of sales (LgSales), although we expected a positive association with the dividend policy, the findings suggest that none of the sectors are significantly influenced by it. The LgSales variable is not considered for panel regression estimation in the BANKING and FINSER sectors, because of the difference in revenue parameters. The log of market capitalization (LgMCap) is used to evaluate the influence of the size on the dividend payout for these sectors. Information on LgMCap was not available for all companies of the TEXTILE-sector, hence it is excluded for the panel regression estimation of this sector. The results show a positive association of LgMCap with dividends of the ENGG, AUTO, PHARMA, CONSGD, M-OTH, MEHH, and CONSTR sectors. The positive impact indicates that firms from these sectors that are greater in size are likely to pay more dividends. This is likely, as such firms can access capital markets without difficulty, thereby having lesser dependence on retained surplus, thus allowing them to distribute more dividends (Mohamed et al. 2012; Al-Najjar and Kilincarslan 2017).

Furthermore, Appendix A shows that operating profits have a positive effect on the payout policy for the MINING, POWER, and MEHH sectors. This means that the sectors reporting a poor operating income will pay lower dividends, consistent with (Li and Lie 2006). However, the results are opposite for the AUTO, M-OTH, and ITTEL sectors. A possible explanation for this could be that the firms of these sectors continue to pay dividends, although the operating profits are low, as they prefer to distribute stable dividends, as reported by (Bhat and Pandey 1994) for Indian firms.

The operating measures are used to evaluate the impact of the size/scale of operations. Many studies as discussed in the literature review have reported that larger size firms are likely to pay higher dividends. We also find that either a higher tangibility of assets/market capitalization/operating profits or lower business risk positively influences dividends. At least one or more operating measures are found to be significant for the consolidated sample and for each of the individual sectors.

#### 4.3.2. Debt Measures

The results reveal a negative association between debt and dividend policy for the AGRO, MINING, POWER, MEHH, CONSTR, LOGISTICS, ITTEL, and FINSER sectors. This implies that sectors with high debt levels appear to pay low dividends (Aivazian et al. 2003b; Li and Lie 2006; Al-Najjar and Kilincarslan 2017). However, for the BANKING-sector, the results depict a significant positive effect. A possible explanation is that the easy availability of external sources of funds for banks enables them to pay higher dividends and rely less on retentions (Auerbach 1982; Jensen 1986; Bhole 2000; Bhole and Mahakud 2005). Furthermore, for the remaining sectors, debt levels do not significantly influence dividends. This means that the dividend policy of the ENGG, AUTO, TEXTILE, PHARMA, CONSGDS, M-OTH, and S-OTH sectors do not depend on the debt levels, as found by (Abor and Bokpin 2010; Farooq and Jabbouri 2015; Yusof and Ismail 2016).

Denis and Osobov (2008) have observed that a lower interest coverage ratio leads to the abandonment of dividend payout. We also show that the interest coverage ratio positively influences the payout policy for the TEXTILE, LOGISTICS, and BANKING sectors. However, for the remaining sectors, the results show no significant impact.

Similar to the consolidated panel estimates, the sector-wise panel results also reveal that the current ratio and dividend policy are significantly positively associated in the AGRO, MINING, ENGG, AUTO, POWER, MEHH, CONSTR, and LOGISTICS sectors. This implies that higher short-term liquidity enables these sectors to pay higher dividends.

Overall, we found that a higher interest coverage ratio and current ratio, and lower debt ratios tend to influence the dividends of Indian firms. Except for the PHARMA, CONSGDS, M-OTH and S-OTHS sectors, either of the debt measures were found to be significant.
