Financial Management Practices by P. K. Jain Shveta Singh & Surendra Singh Yadav

Author:P. K. Jain, Shveta Singh & Surendra Singh Yadav
Language: eng
Format: epub
Publisher: Springer India, India

Section VI Concluding Observations

The important conclusions emerging out of the study may now be underlined.

It is gratifying to note from 11-year (2001–2011) period of the study that the majority of the sample companies follow stable dividend policy. They seem to follow an approach similar to Lintner’s model. The survey findings on the preference to adopt stable dividend policy (by sectors like oil and gas and ICT amongst others) were in fact more revealing. This practice is in tune with the sound principles of financial management.

The empirical evidence, further, suggests that the sample firms have dividend payout ratio of much less than 25% for the entire period of the study perhaps suggesting that the sample consists of companies with good growth opportunities. It is worthwhile to mention here that the dividend payout ratios have been gradually decreasing over the past two decades (as is evident after comparing results with previous studies, viz. Jain and Kumar (1997), Jain and Yadav (2000) and Jain and Yadav (2005)), perhaps indicating better growth opportunities for companies now, necessitating the ploughing back of cash into the business.

The study has also brought out industry-wise variations, to some extent, as far as dividend policy and practices are concerned. For instance, FMCG and healthcare sectors had high D/P ratios whereas sectors like metals and diversified reported low D/P ratios.

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