Cash Dividend Announcements in India: Evidence from Finance Managers

Abstract

Cash dividends are probably the most important form of payout policy and a method of delivering value to shareholders. This paper aims to analyze the results of the survey (using structured questionnaire) on the perception of cash dividends and their announcements by finance managers of dividend-paying firms listed at the Bombay Stock Exchange (BSE). A case for the existence of signaling effects in the stock market in developing economy such as India is made on the basis of the findings. To lend credence to the findings, secondary data were also collated from 2003-2013. The findings reveal that primary motive in India for cash dividend is to attract more investors. Finance managers treat cash dividends as an attractive instrument, thereby increasing the market value of the firm. They express strong support for the signaling theory. The sample companies adopt a conservative approach and emphasize on dividend stability.