Analysis of Dividend Pay Out Trend
The Impact of Dividend Policy on Shareholders’ Wealth of Selected Major Pharmaceutical Units in India
CHAPTER IV ANALYSIS OF DIVIDEND PAY OUT TREND 4.1 Introduction Dividend policy has been a concern of significance in financial literature since inception of Joint Stock Companies. Dividends are commonly defined as the distribution of earnings (past or present) in real assets among the shareholders of the firm in proportion to their ownership.xxxix Dividend policy connotes to the payout policy, which managers practise in deciding the volume and pattern of cash sharing to shareholders over time. Managements’ principal aim is shareholders’ wealth maximization, which renders into maximizing the worth of the company as measured by the price of the company’s common stock. This goal can be achieved by giving the shareholders a “fair” payment on their investments. Payout policy is vital not only because of the quantity of money concerned and the recurring nature of the decision, but also because payout policy is narrowly associated to, and relates with, nearly every financial and investment decisions firms make. Managers must decide the level of dividends, what repurchases to make, the amount of financial slack the firm carries, investment in real assets, mergers and acquisitions, and debt issuance. Since capital markets are neither perfect nor absolute, all of these decisions interrelate with one another.xl
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The Impact of Dividend Policy on Shareholders’ Wealth of Selected Major Pharmaceutical Units in India
As a result, the dividend payout trends of the companies under the study have been analyzed to assess dividend policy adopted by the companies. To test whether the actual dividend payout and trend value of dividend payout are significant or not, the following hypothesis is also framed and tested: H0 – There is no significant difference between actual and trend
values of dividend payout among the selected players during the study period. H1 There is
CHAPTER IV ANALYSIS OF DIVIDEND PAY OUT TREND 4.1 Introduction Dividend policy has been a concern of significance in financial literature since inception of Joint Stock Companies. Dividends are commonly defined as the distribution of earnings (past or present) in real assets among the shareholders of the firm in proportion to their ownership.xxxix Dividend policy connotes to the payout policy, which managers practise in deciding the volume and pattern of cash sharing to shareholders over time. Managements’ principal aim is shareholders’ wealth maximization, which renders into maximizing the worth of the company as measured by the price of the company’s common stock. This goal can be achieved by giving the shareholders a “fair” payment on their investments. Payout policy is vital not only because of the quantity of money concerned and the recurring nature of the decision, but also because payout policy is narrowly associated to, and relates with, nearly every financial and investment decisions firms make. Managers must decide the level of dividends, what repurchases to make, the amount of financial slack the firm carries, investment in real assets, mergers and acquisitions, and debt issuance. Since capital markets are neither perfect nor absolute, all of these decisions interrelate with one another.xl
47
The Impact of Dividend Policy on Shareholders’ Wealth of Selected Major Pharmaceutical Units in India
As a result, the dividend payout trends of the companies under the study have been analyzed to assess dividend policy adopted by the companies. To test whether the actual dividend payout and trend value of dividend payout are significant or not, the following hypothesis is also framed and tested: H0 – There is no significant difference between actual and trend
values of dividend payout among the selected players during the study period. H1 There is