Factors influencing dividend decisions of Indian construction, housing and real estate companies: An empirical panel data analysis

This paper makes an attempt to identify the factors influencing dividend policy by analysing data of 125 companies enngaged in housing, construction and real estate business in India. These companies are selected which have paid dividend throughout the study period. Most of these companies are listed with either Bombay Stock Exchange or National Stock Exchange. This paper applies three alternative methods to verify and validate the results obtained from each other method. These methods are fully modified ordinary least squares (OLS), dynamic OLS and generalized methods of moments (GMM). Empirical findings of this research article depict that firm size, leverage and liquidity are significantly affecting dividend payout ratios and these variables have a negative relationship with the dividend payout ratio of the selected real estate firms. The results indicate that firm risk as measured through price-earnings ratio (P/E ratio) has a positive association with dividend payout ratio of selected real estate firms. Lagged dividend payout ratio used in the GMM test as an exogenous variable is showing positive significant association with dividend payout ratio. A firm's growth shows a negative relationship with dividend payout ratio using GMM technique. The present study shall be useful to different stakeholders of real estate companies. Various significant determinants as identified can be used by management for designing optimum dividend policy and providing maximum benefits to existing shareholders. Similarly existing as well as prospective shareholders may predict the future payment of dividend and accordingly they may take investment decisions in these firms, as the future fund's requirement of a firm depends upon dividend payment and retention ratio.

Automated summary

This study identifies significant factors influencing dividend payout ratios of selected real estate firms in India, including firm size, leverage, liquidity, firm risk measured through P/E ratio, lagged dividend payout ratio, and firm growth. The findings can be utilized by stakeholders for designing optimal dividend policies and maximizing benefits for shareholders. Additionally, existing and prospective shareholders can use these determinants to predict future dividend payments and make investment decisions accordingly.