The influence of dividend policy on firm’s financial performance: Evidence from the India

Purpose: Dividend policy is one of the utmost widely researched topics in the field of corporate finance. Researchers, managers and legislators debate on the issue of whether dividend policies have an impact on stock prices. Dividend models and policies are followed by all businesses in a certain industry and they are regarded as a sign of the business's financial health. The present study aimed at identifying the relationship among the Market Price per Share and Return on Equity with dividend policies of selected BSE listed companies in India, over the last six years i.e. 2018-19 to 2023-24.Design/methodology/approach: The present study is empirical in nature. Selected 20 BSE-listed companies are considered for this research. Panel regression is used and two dependent variables & four independent variables are considered: the dependent variables are Market Price per Share (MPS) & Return on Equity (ROE) and explanatory variable is Dividend Payout Ratio (DPR) and control variables are Assets Size (SIZE), Financial Leverage of Company (LEV) and Growth of Revenue (GRO).Findings: Pooled regression results indicate a significant, negative association between Market Price per Share with Dividend Payout ratio and positive relationship between Return on Equity with Dividend Payout ratio. Furthermore, findings revealed that Growth has a positive correlation and is statistically significant with the all dependent variables. I also have some insightful suggestions for industries, such as adopting a more suitable dividend policy model, maintaining a low dividend rate and making a clear announcement about dividend payments. Research limitations/implications: This study focuses only on selected BSE companies in India. In terms of implication, the theoretical bases discussed in the literature review and hypotheses developments are mostly validated.