Ph.D Research Scholar, Kanchi Mamunivar Centre for PG Studies, (Autonomous â€œAâ€ Grade Centre with Potential for Excellence by UGC), (Government of Puducherry) Pondicherry University, Puducherry, India 1
Associate Professor of Commerce, Kanchi Mamunivar Centre for PG Studies, (Autonomous â€œAâ€ Grade Centre with Potential for Excellence by UGC), (Government of Puducherry) Pondicherry University, Puducherry, India 2
Dividend policy (DP) of corporate sector is widely researched topic in finance however; it remains a debatable issue to decide what factors determine the DP. The objective of this paper is to analyze the impact of dividend policy (DP) on shareholders’ wealth (SW) of Fast Moving Consumer Goods (FMCG) sector in India. Out of 16 firms listed on National Stock Exchange (NSE) 13 firms that have been paying dividend consecutively for the past ten years are considered for analysis. In the light of the prior literature, key predictor variables such as earnings per share (EPS),dividends per share (DPS), retained earnings per share (RPS), price earnings ratio (PER), lagged price earning (LAGPER), earnings (EAR), and lagged market value (LAGMPS) are considered for analyzing the impact of DP on SW. The descriptive statistics reveals that the data form in to normal. Whereas when the assumptions needed to be fulfilled for the Ordinary Least Square method (OLS), the data are found to be homoskedastic and are free of autocorrelation.Augmented Dickey Fuller Test (ADF), White - Heteroskedasticity Test, Auto Correlation, Breuch-Godfrey Serial correlation LM test, Durbin-Watson, Lagrange Multiplier (LM) for Autoregressive conditional heteroskedasticity (ARCH-LM), Correlation, Ordinary Least Square Regression and Chow test are applied using Eviews 7 Econometrics software package for analysis. Regression result proves that DPS (121.65) and RPS (9.68) have significant positive co-efficient on EPS(SW) of FMCG firms in India before global financial melt down, while DPS (76.74), LAGPER (1.52) and LAGMPS (0.27) have significant positive co-efficient (76.74) on EPS(SW) of FMCG firms in India after global financial melt down. The results of the Chow test proves that the FMCG firms have significant shift-in-structure (positive improvement) in respect of SW after global financial melt down.
The study used new estimation methodology such as Augmented Dickey Fuller Test, White - Heteroskedasticity Test, Auto correlation, Breuch-Godfrey Serial correlation LM test, Durbin-Watson and ARCH-LM test and Chow test for analysis. Very few studies, which have investigated the impact of DP on SW before and after financial melt down studied the structural changes. However, the present study proved that the DP is significantly and positively related to retained earnings per share and earnings per share (SW). The result of the study is consistent with the findings of Gul et al. (2012), Salman (2013), Bawa and Kaur (2013), Azhagaiah and Sabaripriya (2008), etc.
Allaro, B.H., B. Kassa and B. Hundie, 2011. A time series analysis of structural break time in the macro - economic variables in Ethiopia. African Journal of Agricultural Research, 6(2): 392 - 400.
Atiyet, B., 2012. The impact of financing decision on the shareholders’ value creation. Journal of Business Studies, 4(1): 44-63.
Azhagaiah, R. and N. Sabaripriya, 2008. The impact of dividend policy on shareholders’ wealth. International Research Journal of Finance and Economics, 20: 180-187.
Azhagaiah, R. and P. Veeramuthu, 2010. The impact of firm size on dividend behavior: A study with reference to corporate firms across industries in India. Managing Global Transitions: International Research Journal, 8(1): 49-78.
Bawa, S.K. and P. Kaur, 2013. Impact of dividend policy on shareholders’ wealth: An empirical analysis of indian information technology sector. Asia Pacific Finance and Accounting Review, 1(3): 17 – 24.
Chidinma, O., S.C. Okaro and V.C. Pius, 2013. Shareholders value and firms dividend policy: Evidence from public firms in Nigeria. Research Journal of Management Science, 2(12): 26-28.
Chow, G.C., 1960. Tests of equality between sets of coefficients in two linear regressions. Econometrica, 28: 591-605.
Devaki, S. and D. Kamalaveni, 2012. Shareholding patterns and dividend payout: An empirical analysis in Indian corporate hotels. International Journal of Multidisciplinary Research, 2(1): 49-63.
Gul, S., M. Sajid, N. Razzaq, M. Iqbal and M. Bila Khan, 2012. The relationship between dividend policy and shareholders’ wealth. Economic and Finance Review, 2(2): 55-59.
Kumaresan, S., 2014. Impact of dividend policy on shareholders’ wealth: A study of listed firms in hotels and travels sector of Sri Lanka. International Journal of Technological Exploration and Learning, 3(1): 349-352.
Lee, H.B., 2008. Using the chow test to analyze regression discontinuities. Tutorials in Quantitative Methods for Psychology, 4(2): 46 – 50.
Olandipupo, A.O. and C.O. Okafor, 2011. Control of share wealth maximization in Nigeria. Journal of Business System Governance and Ethics, 6(1): 19-24.
Onwumere, J., G. Ibe and O. Frank, 2012. Does the use of outsiders’ fund enhance shareholders’ wealth: Evidence from Nigeria. Journal of Finance and Investment Analysis, 1(1): 173-197.
Parua, A. and A. Gupta, 2009. Dividend history and determinants in selected Indian firms. Australian Accounting Business and Finance Journal, 3(4): 46-83.
Rafique, M., 2012. Factors affecting dividend payout: Evidence from listed non-financial firms of Karachi stock exchange. Business Management Dynamics, 1(11): 76-92.
Salman, M., 2013. Effect of dividend policy on shareholders’ wealth: A study of sugar industry in Pakistan. Global Journal of Management and Business Research Finance, 13(7): 47-54.
Tahir, A. and N. Raja, 2014. The impact of dividend policy on shareholders’ wealth. International Journal of Business and Management, 16(1): 24-33.
Uwuigbe, U., J. Jafaru and A. Ajayi, 2012. Dividend policy and firm performance: A study of listed firms in Nigeria. Accounting and Management Information Systems, 11(3): 442-454.