dividend policy of indian organizations

8/9/2019 Dividend Policy of Indian organizations

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Presented by:Ajay Simha

Anupam Chaplot

Siva Harsha Karra


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Objective

y The present study examines the dividend behavior of

Indian corporate firms over the period 2000 - 2009 andattempts to explain the observed behavior.


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Methodologyy Data of 20 different industries has been collected over

the period of 10 years

y The same is analyzed to see the variation in the trendacross industry.

yA total of 18,657 companies have been studied.

y Lintners Model has been used.


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ObservationsIndustry Number of companies

Asset financing services 583

Banking services 201

Communication services 187

Construction 1431

Electricity 354

Food & beverages 1763

Health services 119

Information technology 961

Metals & metal products 1306

Mining 178

Textiles 1501

Wholesale & retail trading 2046

Chemicals 2336

Hotels & tourism 354

Investment services 2067

Machinery 1464

Non-metallic mineral products 614

Recreational services 274

Transport equipment 548

Transport services 370

Total 18657


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No. of times dividend paidIndustry 0 1 2 3 4 5 6 7 8 9 10 total

Asset financing 333 29 23 6 13 9 10 8 3 8 20 462

ommunication 149 3 8 3 4 2 2 1 0 0 3 175

Bank 70 14 11 5 11 14 8 10 3 8 31 185

onstruction 790 44 37 29 28 18 24 14 9 9 27 1029

electricity 175 10 12 9 10 6 10 1 2 1 10 246

food beverages 1036 100 68 37 32 38 30 22 14 28 47 1452

health services 82 4 6 3 3 0 0 2 1 1 2 104

information

tech. 618 87 54 28 20 13 24 13 9 18 22 906

metal product 790 59 41 39 28 31 22 16 18 21 33 1098

Mining 95 8 6 3 4 5 4 4 3 5 11 148

Textile 929 55 51 40 35 20 26 17 25 21 34 1253

Wholesale

retail 1426 89 69 37 47 32 30 29 15 14 31 1819


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Year wise break up

Industry 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Average

Asset financing 15% 13% 11% 12% 13% 15% 14% 15% 14% 12% 13%

Communication 4% 3% 3% 6% 5% 6% 9% 8% 9% 6% 6%

Bank 34% 31% 36% 39% 43% 36% 40% 39% 38% 36% 37%

Construction 7% 7% 7% 8% 9% 11% 13% 15% 15% 12% 10%

Electricity 10% 9% 9% 11% 14% 15% 16% 17% 17% 14% 13%

Food beverages 15% 12% 11% 11% 12% 13% 13% 13% 13% 12% 13%

Health services 5% 4% 8% 12% 11% 10% 10% 8% 11% 9% 8%

Information tech. 14% 11% 9% 11% 11% 13% 14% 15% 13% 12% 12%

Metal product 11% 10% 9% 11% 12% 14% 15% 17% 18% 14% 13%

Mining 14% 16% 15% 20% 22% 26% 25% 24% 27% 23% 21%

Textile 12% 11% 11% 12% 13% 14% 15% 16% 11% 7% 12%

Wholesale retail 8% 7% 7% 9% 10% 10% 10% 10% 9% 8% 9%

Number of companies as Percentage who have paid dividend in each year


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Ratio of Percentage of dividend paid to PAT

Industry 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Asset financing 63.6% 72.7% 76.5% 41.0% 217.5% 44.1% 42.6% 29.2% 31.5% 30.5%

Banking services 19.9% 26.1% 19.3% 17.3% 17.8% 20.1% 20.3% 20.1% 18.9% 18.6%

Communication services 18.4% 62.1% 42.3% 79.9% 11.4% 15.9% 21.2% 12.5% 16.5% 8.7%

Construction 47.0% 49.3% 44.7% 51.1% 42.2% 33.5% 16.8% 17.1% 17.5% 14.3%

Electricity 20.6% 30.5% 26.3% 33.0% 33.0% 57.0% 41.7% 37.1% 41.5% 57.7%

Food beverages 70.5% 60.1% 51.2% 68.4% 53.6% 38.1% 39.4% 36.7% 38.9% 37.6%

Health services -54.8% -131.7% -1857.0% 100.3% -158.3% 51.4% 82.5% 36.4% 66.2% 48.9%Information tech. 12.6% 11.4% 16.0% 27.5% 46.7% 31.6% 44.9% 24.9% 31.1% 23.9%

Metal product -30.1% -39.0% -17.5% 124.0% 13.8% 17.2% 18.1% 15.5% 16.1% 22.5%

Mining 47.1% 59.6% 37.6% 43.3% 41.3% 45.0% 41.7% 40.5% 43.1% 41.3%

Textile -10.9% -8.7% -9.2% -13.3% 37.1% -2888.9% 23.6% 19.6% 20.9% 14.3%

Wholesale retail 86.3% -22.5% -32.9% 1469.5% 42.7% 37.9% 26.0% 28.0% 35.4% 56.3%

Chemicals 49.9% 45.1% 51.9% 52.4% 40.9% 35.7% 34.3% 31.9% 22.8% 28.7%

Hotels & tourism 65.8% 93.3% -69.5% 154.1% 145.2% 53.6% 33.3% 29.7% 28.6% 31.0%

Investment services 29.9% -92.4% 34.0% 53.2% 24.9% 17.5% 20.1% 21.2% 15.1% 24.9%

Machinery 134.5% 205.6% 323.4% 703.6% 99.7% 42.3% 25.6% 21.8% 23.4% 35.2%

Non-metallic mineral

products -53.9% -519.8% -238.9% 79.6% 43.4% 33.1% 24.3% 22.3% 18.2% 21.3%

Recreational services 11.1% 37.6%

-

14329.8% 172.4% 164.9% 109.5% -35.2% -47.3% -87.3% -63.1%

Transport equipment 55.5% -64.6% 76.0% 48.6% 39.7% 31.3% 29.3% 28.0% 26.3% 34.7%

Transport services 579.7% 83.0% 88.1% 58.6% 48.1% 22.3% 32.1% 114.8% 49.9% -17.5%


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Models testedy Lintners model:y Current years dividend is dependent on current years PAT

and previous years dividend

y Regression Equation: Y=+ 1X1+ 2X2 Y- Dividend for the present year dependent variable X1 - PAT of current year - independent variable

X2 - Dividend previous year - independent variable - constant 1 regression coefficient for PAT 2 regression coefficient for previous years dividend


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Sno Industry R square Value significance

1Ass t fi a ci g 0.916 at 0.056

div_lasty ar 0.198

2Commu icatio -0.146 at 0.395

div_lasty ar 0.688

3co structio 0.983 at 0

div_lasty ar 0.0384El ctricity 0.956 at 0.128

div_lasty ar 0.002

5Food& b v rag s 0.991 at

div_lasty ar

6h alth s rvic s 0.906 at 0.881

div_lasty ar 0.011

7IT 0.842 at 0.006

div_lasty ar 0.099

8Metal roduct 0.957 at 0.001

div_lastyear 0.025

9mi i g 0.99 at 0

div_lastyear 0.427

Results


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Sno Industry R square Value significance

10textile 0.833 pat 0.071

iv lastyear 0. 51

11wholesale retail 0.911 pat 0.019

iv lastyear 0.027

12chemical 0.7 pat 0.1

iv lastyear 0.686

13hotel 0.988 pat 0iv lastyear 0.655

14Investment services 0.759 pat 0.091

iv lastyear 0.834

15Machinery 0.98 pat 0.008

iv lastyear 0.001

16Non mettalic mineral pro ucts 0.987 pat 0

iv lastyear 0.06

17recreational services 0.708 pat 0.048

iv lastyear 0.275

18transport equipment 0.982 pat 0

iv lastyear 0.143

19Transport services 0.724 pat 0.208

iv lastyear 0.003

Results (cnt .)


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IT sector analysisy Objective

y To verify Lintners model taking data for each company

over a period of 10 yearsy Null Hypothesis

y There is no significant difference in the values of regressioncoefficients found out using aggregate data and individualcompany data

y Alternate hypothesis

y There is significant difference between the values


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Methodologyy Data of 20 companies over a period of 10 years are

taken and the Lintners model is verified for this data.

Model Summaryb

Model R R SquareAdjusted R

SquareStd. Error ofthe Estimate

1 .921a .847 .844 159.730

a. Predictors: (Constant), Previous_DIvidend, PAT

b. Dependent Variable: Current_Dividend


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Conclusiony Lintners model explains the dividend policy in most of the

industries except for some like Chemical, Communication,

Investment services, Recreational services and Transportservices.

y The result from the aggregate of the industry to a greatlevel resemble that of the result of company wise analysis.


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y THANKYOU.

dividend policy of indian organizations

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