CORPORATE GOVERNANCE

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Slide 1: 

IMPACT OF DIVIDEND POLICY ON SHAREHOLDERS’ VALUE –AN EMPIRICAL ANALYSIS OF INDIAN FIRMS NAME- SUJATA KAPOOR RESEARCH GUIDE- DR. KANWAL ANIL ; CO-GUIDE-DR.NASEEM ABIDI DEPARTMENT- MANAGEMENT SEMESTER IV- JAN- JULY’08

RESEARCH OBJECTIVES : 

RESEARCH OBJECTIVES To empirically examine the determinants of dividend smoothing by firms and find out its linkage with information content of dividends. To analyze the influence of firms’ characteristics like profitability, growth, size and industry growth phase on dividend payment pattern. To investigate the association between corporate governance and dividend payout policies of Indian corporate firms To add to the understanding of the effect of dividends on shareholders’ wealth. To study and analyze the trends in dividend payments pattern of Indian corporate firms.

Slide 3: 

“Corporate governance deals with the ways in which suppliers of finance to corporations assure themselves of getting a return on their investment” Shleifer &Vishney (1997)

LITERATURE REVIEW : 

LITERATURE REVIEW

EMERGING ECONOMIES : 

EMERGING ECONOMIES

Slide 9: 

INTERNATIONAL SCENARIO Regulated and dispersed ownership Strict disclosure norms and investor protection Oxley committee in US and Cadbury report in UK INDIAN SCENARIO “Mixed Bag” CG not homogeneous Family run firms Hybrid system

KEY VARIABLES : 

KEY VARIABLES

METHODOLOGY : 

METHODOLOGY SECTORAL STUDY Information & Technology sector FMCG sector Service sector DATA AND SAMPLE Data has been sourced from Prowess database of CMIE. IT sector (2001 to 2007)- constituent companies of CNXIT index-18 firms FMCG sector (2001-2007)- 15 firms which are constituent of CNX FMCG index. Service sector (2001-2007)- 30 constituent companies of CNX Service sector index.

METHODOLOGY (Contd.) : 

METHODOLOGY (Contd.) VARIABLES Y= Dividend Intensity X1= Promoters holding X2= Institutional holding X3=FII holding X4= Corporate holding X5= Debt equity ratio Correlation & Regression is used to explore the relationship between dividend intensity and these variables.

ANALYSIS- IT SECTOR : 

ANALYSIS- IT SECTOR CORRELATION MATRIX

ANALYSIS- IT SECTOR : 

ANALYSIS- IT SECTOR LINEAR REGRESSION Multiple regression analysis Y=α+b1x1+b2x2+b3x3+b4x4+b5x5

ANALYSIS- IT SECTOR : 

ANALYSIS- IT SECTOR *values are significant at 5% sig. level

ANALYSIS-FMCG SECTOR : 

ANALYSIS-FMCG SECTOR CORRELATION MATRIX

ANALYSIS-FMCG SECTOR : 

ANALYSIS-FMCG SECTOR LINEAR REGRESSION Multiple regression analysis Y=α+b1x1+b2x2+b3x3+b4x4+b5x5

ANALYSIS-FMCG SECTOR : 

ANALYSIS-FMCG SECTOR *values are significant at 5% sig. level

ANALYSIS-SERVICE SECTOR : 

ANALYSIS-SERVICE SECTOR CORRELATION MATRIX

ANALYSIS-SERVICE SECTOR : 

ANALYSIS-SERVICE SECTOR LINEAR REGRESSION Multiple regression analysis Y=α+b1x1+b2x2+b3x3+b4x4+b5x5

ANALYSIS-SERVICE SECTOR : 

ANALYSIS-SERVICE SECTOR *values are significant at 5% sig. level

CONCLUSION : 

CONCLUSION Developing Economy Common Law country Credit Lyonnais Securities Asia- India ranks after Argentina , China , HongKong and Hungary- Average payout of 22% CLSA – companies with good Corporate Governance have outperformed their indices in recent years. IT firms ranks high on good corporate governance. Information symmetrical Infosys was the first firm to adhere to norms of Kumar Manglam Birla Committee(1999). Increasing the shareholders wealth and safeguarding the interests of stakeholders not incompatible. Wipro and Satyam also on same lines.

Slide 23: 

FMCG SECTOR Cash rich companies Low level of debt FII affect dividend policy decisions. SERVICE SECTOR Debt equity ratio is significant RESEARCH GAP Applying non linear regression model

REFERENCES : 

REFERENCES Avizian, Varouj, Laurence Booth and Sean Cleary (2003) , “Do emerging market Firms follow different dividend policies from Us firms” , Journal of Financial research,371-87 Easterbrook, (1984), “Two agency cost explanations of dividends”, American Economic Review,74(4):220-30 Faccio , Mara , Lary , H.P. Lang and Leslie Young (2001), “Dividends and Expropriation” ,American Economic Review,91:54-78 Gugler, Klaus and B. Burcin Yurtoglu (2003), “Corporate Governance and dividend payout policy in Germany “, European Economic Review, 47:731-58 Jensen, Gerald R., Donald P. Solberg and Thomas S.Zorn(1992), “Simultaneous Determination of insider ownership, debt , and dividend policies “, Journal of Financial and Quantative analysis,27(2):247-63 Jensen , Michael C. (1986), “Agency cost of free cash flow, corporate finance , and takeovers” , American Economic Association Papers and proceedings, 76(2):323-29 Han , Ki C. , Suk Hun Lee and David Y. Suk(1999), “Institutional shareholders and dividends’, Journal of Financial and Strategic Decisions , 12 (1):53-62

Slide 25: 

Linter , John.1956.”Distribution of incomes of corporations among dividends, retained earnings and taxes." American Economic Review 46, pp 97-113 Shleifer , A., and R. W. Vishny , 1997 , a survey of corporate Governance , Journal Of Finance ,52, &37-783.