Dividends and Promoters: The Role of Controlling Shareholders in India.

The paper investigates the lesser researched area of possible association between promoter equity ownership and dividend policy. Firms in India have concentrated ownership of promoters and thus, promoters may influence the firm's various decisions, including its dividend policy. The paper tests the relation between the promoter ownership and dividend payment, after controlling several firm characteristics such as size, return on assets, cash ratio and leverage. Based on panel data of Nifty 100 firms from March 2011 to March 2019, evidence for a positive relation between the promoter's equity ownership and dividend payment is provided. The results are in line with the reputation building hypothesis. This hypothesis suggests that the positive relation between promoter ownership and dividend payout is a result of reputation building mechanism such that firms intend to send a positive signal to the market and investors that they are not expropriating the rights of minority shareholders. [ABSTRACT FROM AUTHOR]