Socioeconomic Challenges in the Defence Sector: Interlinkages Between Defence Budgeting, Sectoral Growth, and Dividend Yield

The study investigates the relation between the Indian defence budget, sectoral expansion, and dividend yield across 18 listed defence sector firms from 2015 to 2024. Employing a panel Ordinary Least Squares (OLS) methodology in EViews, the analysis investigates socioeconomic challenges and whether fluctuations in the defence budget and sectoral growth significantly impact dividend policies of these firms. Findings resonate a significant and statistically favourable association of defence budget allocation with dividend yield, confirming that increased government spending enhances financial stability and return distribution in the defence sector. However, specific firm factors like profitability, firm size, and market capitalisation also influence dividend yields, highlighting the complexity between socioeconomic challenges, macroeconomic policies, and corporate payout decisions. The study offers extensive guidance of empirical research relevant for policymakers, manufacturers, and investors, emphasising the need for a balanced approach between national defence priorities and investor expectations. These results contribute to the growing literature on sector-specific dividend behaviour in emerging markets like India.