IMPACT OF DIVIDEND POLICY ON SHAREHOLDER VALUE IN INDIAN COMPANIES

Abstract

Abstract: This research investigates the impact of dividend policy on shareholder value in Indian companies. With rising equity participation and evolving capital markets in India, understanding dividend decisions has critical implications for investors and corporate governance. The study examines theoretical perspectives—such as the Dividend Irrelevance Theory, Bird in the Hand Theory, and Signaling Theory—and tests empirical relationships between dividend payout, dividend yield, and shareholder value measured through market performance indicators like Earnings Per Share (EPS) and Tobin’s Q. Using a sample of listed companies from the BSE 500 for the period 2015–2024, findings suggest that a stable and moderate dividend payout positively correlates with shareholder value in India. However, excessively high payout ratios may signal decreased reinvestment opportunities, reducing value creation. The study provides insight for financial managers, policymakers, and investors on dividend strategies tailored to the Indian market environment. Keywords: Dividend Policy, Shareholder Value, Dividend Payout Ratio, Indian Companies, Stock Return