**5. Overall Summary and Conclusions**

This study offers fresh evidence on the key determinants of the dividend policy for an emerging market economy using financial data for Indian-listed firms. This study uses pooled OLS and fixed effect panel data models to examine the factors affecting dividends.

Our findings suggest that in general, firms with a larger size, higher interest coverage ratio and profitability, and low business risk and debt are likely to distribute higher dividends in India. The results on profitability indicate the applicability of the free cash flow hypothesis in India. However, the findings also reveal that companies with more growth opportunities and lower cash flows also continue to distribute dividends. We attribute this to the condition that Indian firms prefer to maintain stability in dividend policy, such that availability of investment opportunities and the non-availability of cash is insignificant for determining dividend policy.

We also scrutinize the variation in dividend policy across sixteen industrial sectors in India. The results suggest that the factors influencing dividend policy differ across sectors. The sector-wise results show that size (either tangibility/LgMCap) is found to significantly influence payout policy in all sectors except AUTO and POWER. Also, either one or more of the debt measures (debt ratio/interest coverage/current ratio) are also found to be significant in all of the sectors, excluding PHARMA, CONSGDS, M-OTHS, and S-OTHS. For summary measures, we found that profitability has the same positive relation for all industrial sectors. Whereas growth measure and liquidity measure do not significantly influence the dividend policy in eleven sectors. Moreover, for the remaining sectors, the signs are mixed.

Hence, sectoral results suggest that there are no uniform set of factors influencing dividend policy for all sectors. Although a "one-size fits all" technique is unsuitable for evaluating the factors, our finding suggests that the dividend policies of firms across sectors are generally sensitive to size, debt, and profitability. Preferences of one variable over another may occur as a result of firm-level and sector-level effects on dividend policy recognized in past empirical research (such as Sawicki 2003). Furthermore, these findings provide unbiassed guidelines to investors regarding the factors that influence the dividend policies of Indian companies.

Lastly, the findings reveal that the majority of the theories on dividend policy that are classically based on developed markets can be applied to emerging market countries such as India, as most of the characteristics found to important in determining dividend policies in India are consistent with those established in developed economies. However, further research is needed for investigating the influence of other firm-specific characteristics, such as corporate governance policies and investor demographics, which are not included in this study.

**Author Contributions:** Conceptualization, G.P. and S.R.; data curation, G.P.; formal analysis, G.P. and S.R.; investigation, G.P.; methodology, G.P. and S.R.; resources, G.P. and S.R.; software, G.P.; supervision, S.R.; validation, G.P. and S.R.; visualization, G.P.; writing (original draft), G.P.; writing (review and editing), S.R.

**Funding:** This research received no external funding.

**Conflicts of Interest:** The authors declare no conflict of interest.


**Table A1.** Sector-wise panel regression.

**Appendix A**

The independent variables are as follows. Tangibility is total assets minus current assets divided by total assets. BusRisk is the standard deviation of return on investment (ROI) (lagged

three years). LgSales is the natural logarithm of sales in local currency. LgMCap is the natural logarithm of market capitalization and tax (EBIT) divided by total sales. DebtRatio is the long-term debt divided by total assets. IntCover is EBIT divided by interest. CurRatio is current assets divided by current liabilities.

ROE is Net profit after tax (NPAT) divided by net worth. ROI is EBIT divided by capital employed (CE). P/B is Market Price Per share at the end of the year divided by book value per

share for the year. CFPS is net cash flow from operating activities divided by number of equity shares outstanding.

level, \*\* Significant at the 5 percent level & \* Significant at the 10 percent level.

 in local currency. OpProfit is the earnings before interest

 The *t*-statistics are given in parentheses.

 \*\*\* Significant at the 1 percent
