Dividend Policy and Stock Price Behaviour in Indian Corporate Sector

Private sector has been playing an important role in the Indian economy contributing more than 40 per cent of national income.The private corporate sector in India has played a significant role for enhancing the growth rate, employment and price stability. The perception about the role of private corporate sector has undergone a significant change in the recent years because of the liberalization process. In this process the importance of private corporate sector has increased by many folds. It has the major contributions for development of debt market and equity market as well. Indian capital market is now the seventh largest capital market in the world (Overview of Securities Market, NSE, 2008). The dividend policy decison is regarded to be complex having implications for economy. Much of the literature in India dealing with dividend behaviour is concerned with determinants of dividend behaviour whereas the impact of the dividend behaviour on market value of the firm is not given importance. So the present study is going to explore the impact of dividends on market value of the firm with more relevant panel data approach.