Does Ownership Structure Influence Dividend Distribution Policy in India? Evidence Using Panel Data Analysis

Abstract

This article evaluates the influence of ownership structure (OS) components on dividend distribution policy in India. More precisely, it aims to comprehend the impacts of promoters’ shareholdings (PRMS), institutional investors’ shareholdings (INS) and retail investors’ shareholdings (RIS) on dividends of Indian listed companies. This article uses equity dividend divided by book value (DNW) to determine the dividend distribution policy for the selected panel of 80 listed companies for the period of 5 years (2016–2020). The static as well as dynamic panel data regression models are applied in the study. The static panel data regression results exhibit that none of the three OS explanatory variables (PRMS, INS and RIS) affect significantly the dividend distribution policy of Indian listed companies. Similar results are depicted by the dynamic panel data regression model also, thus ensuring robustness of the results. Hence, this article does not find support for agency theory, signalling theory and clientele effect. The study recommends that investors need not consider the composition of shareholding pattern of a company to have any significant influence on dividends while making their investment-decisions. The findings also add to the increasing studies across the globe evaluating the influence of OS on dividends.