Maximising Shareholders' Wealth
International Research Journal of Finance and Economics ISSN 1450-2887 Issue 20 (2008) © EuroJournals Publishing, Inc. 2008 http://www.eurojournals.com/finance.htm
The Impact of Dividend Policy on Shareholders’ Wealth
R. Azhagaiah Faculty Member, Department of Commerce Kanchi Mamunivar Centre for Post Graduate Studies (Autonomous) (Govt. of Puducherry) Affiliated to Pondicherry Central University Puducherry – 605 008, South India E-mail: drrazhagaia@ yahoo.co.in Tel: ++91-0413 – 2255017; Fax: ++91-0413-2251687 Sabari Priya .N Research Scholar, Department of Commerce Kanchi Mamunivar Centre for Post Graduate Studies (Autonomous) (Govt. of Puducherry) Affiliated to Pondicherry Central University Puducherry – 605 008, South India E-mail: sabari_pvsm@yahoo.co.in Tel: ++91-0413 – 2255017; Fax: ++91-0413-2251687 Abstract The present paper is aimed at analyzing the impact of dividend policy of shareholders’ wealth in Organic and Inorganic Chemical Companies in India during 1996 – 1997 to 2005-2006. To measure the impact of dividend policy on shareholders’ wealth multiple regression method and stepwise regression models are used by taking DPSit (Dividend per Share), RE it (Retained Earnings per Share), Pet-1 (Lagged Price Earning Ratio) and MPSit-1 (Lagged Market Price) (MVit-1) as independent variable, and MPSit (Market Price Per Share) as dependent variables. To determine the proportion of explained variation in the dependent variable, the co-efficient of determination (R2) has been tested with the help of F value. The study proves that the wealth of the shareholders is greatly influenced mainly by five variables viz., Growth in sales, Improvement of Profit Margin, Capital Investment Decisions (both working capital and fixed capital), Capital Structure Decisions, Cost of Capital (Dividend on Equity, Interest on Debt) etc. There is a significant impact of dividend policy on shareholders’ wealth in Organic Chemical Companies while the shareholders’ wealth is not
The Impact of Dividend Policy on Shareholders’ Wealth
R. Azhagaiah Faculty Member, Department of Commerce Kanchi Mamunivar Centre for Post Graduate Studies (Autonomous) (Govt. of Puducherry) Affiliated to Pondicherry Central University Puducherry – 605 008, South India E-mail: drrazhagaia@ yahoo.co.in Tel: ++91-0413 – 2255017; Fax: ++91-0413-2251687 Sabari Priya .N Research Scholar, Department of Commerce Kanchi Mamunivar Centre for Post Graduate Studies (Autonomous) (Govt. of Puducherry) Affiliated to Pondicherry Central University Puducherry – 605 008, South India E-mail: sabari_pvsm@yahoo.co.in Tel: ++91-0413 – 2255017; Fax: ++91-0413-2251687 Abstract The present paper is aimed at analyzing the impact of dividend policy of shareholders’ wealth in Organic and Inorganic Chemical Companies in India during 1996 – 1997 to 2005-2006. To measure the impact of dividend policy on shareholders’ wealth multiple regression method and stepwise regression models are used by taking DPSit (Dividend per Share), RE it (Retained Earnings per Share), Pet-1 (Lagged Price Earning Ratio) and MPSit-1 (Lagged Market Price) (MVit-1) as independent variable, and MPSit (Market Price Per Share) as dependent variables. To determine the proportion of explained variation in the dependent variable, the co-efficient of determination (R2) has been tested with the help of F value. The study proves that the wealth of the shareholders is greatly influenced mainly by five variables viz., Growth in sales, Improvement of Profit Margin, Capital Investment Decisions (both working capital and fixed capital), Capital Structure Decisions, Cost of Capital (Dividend on Equity, Interest on Debt) etc. There is a significant impact of dividend policy on shareholders’ wealth in Organic Chemical Companies while the shareholders’ wealth is not
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