This paper attempts to identify the relationship between the price of shares and dividend policy of companies operating in global competitive world. So researcher has selected the most competitive and fastest growing industry of India which has given India the glory and proud through out the world that is Information Technology (IT) Industry. Indian IT Industry has capitalized its position in the Global IT Market by contributing significantly to Indian GDP and major proportion of Indian Export. The researcher has selected 10 IT- Companies of India for the study purpose. The researcher has collected share prices of sample units for the period of two months – one month before and one month after declaring dividend for the year. The researcher has collected all the data from capitaline.com and bseindia.com. The researcher has used T-test and one way Analysis of Variance for analysis, interpretation and finding results.
[...] That is, the payment of dividend should be preferred, if it leads to the maximization of shareholders' wealth. If it is not so, the firm should retain the profit and should not distribute dividend. Financial experts have not been unanimous on this issue. Since the principle objective of the firm is to maximize the share price, question arises, what is the relationship between dividend policy and market share price? This is one of the most controversial and unresolved questions, where the empirical evidence is often mixed. [...]
[...] The data has been tabulated as under: Table No Analysis of Variance Share Prices With in Selected Sampled Companies for the study period Weekly Average Prices of Shares i IT p r o The above table indicates the calculation of analysis of variance of weakly average price of shares of sample companies with in sample companies for the study period of two months one month before and one month after declaring dividends by the IT-Companies. H0: There would be no significant difference in share price volatility with in sample units during the study period. [...]
[...] Suggestions: From the above calculation it is quite clear that a company declaring dividend at an expected rate or above expectation rate, there is a significant increase in the price of share. It can be suggested to a company's financial manager that despite it is necessary to retain some proportion of profit in business for financing growth and development plans and projects but it is also necessary to fulfill investors expectations that is to pay regular return on their investments. [...]
[...] Objectives: The broader objectives are as under: - To know the relationship between effect of dividend decision and volatility of share price - To judge the growth in global competitive era Research Methodology: The study has been carried out on the micro-level, as it is not possible for the researcher to conduct it on the macro-level. As such, the universe of the study is restricted with reference to IT-companies in India; the researcher has selected 10 IT companies with its share price of one month after and one month before declaring dividend in the year 2005-2006. [...]
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