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This study aims to determine whether a firm’s dividends are influenced by the sector to which it belongs.
Certain studies consider that the dividend decision influences the value of a firm (Walter 1963), and is interlinked with the firm’s investment policy.
Researchers also theorize that generally, investors are risk-averse and give preference to receive certain dividends rather than uncertain capital gains, which are riskier.
The findings on profitability support the free cash flow hypothesis for India.
However, we also found that Indian companies prefer to follow a stable dividend policy.
Various factors influencing a firms’ dividend policy have been evaluated by researchers.
The outcome of these studies has not entirely resolved the controversies linked to dividend decision.
The outlay in a profitable venture will also increase the value of a company, resulting in capital gains (future income) to investors.
Theoretically, both dividend payout and retention lead to shareholder wealth maximization.
(2000) report that dividends are not used by managers to attract investor clientele.
The signaling theory by Solomon (1963) and Ross (1977) suggests that dividend policy gives information about a stock.