Factors Affecting the Likelihood of Paying Dividends Evidence from Indian Companies

This paper attempts to identify the factors affecting the likelihood of paying dividends of Indian listed firms during the period 1994-95 to 2012-13. We find that dividend paying firms are larger in size, more profitable, less levered, and more mature than the non-dividend paying firms. The logit regression results suggest that the variables such as market-to-book ratio, financial leverage, business risk and dividend distribution tax have significant negative and variables like firm’s maturity, size of the firm, profitability and liquidity have significant positive impact on the likelihood of paying dividends. The results are robust across the periods for Indian firms and consistent with the pecking order, transaction, signaling and firm life cycle theories of dividend.