Author Details

Dividend distribution and its effects on various aspects of firm is becoming the crucial issue of the firm. The main aim of the study is to know the impact of dividend payout on market price, including other selected independent variables that are required to measure dividend and investment decision. The study has selected 48 companies listed on Bombay Stock Exchange based on high and consistent dividend for the time period from 2008 to 2017. The study covers market price as dependent variable whereas dividend payout, earnings per share, growth, return on equity as independent variables. For the study purpose, to check the multicollinearity, variance influence factor has been used. Balanced panel data and pooled ordinary least square regression has been run to check the impact of independent variables on dependent variables. Correlation is used to check the relationship between the variables. The study found high and significant impact of dividend payout, earnings per share and growth on market price of shares whereas return on equity has no significant impact on market price of shares. The study also revealed the negative and significant correlation between dividend payout and market price. It means increase in dividend payout decrease the market price and vice-a-versa. It also shows dividend payout and growth have positive significant impact. It indicates that high growth companies are paying high dividends. The study revealed that Return on equity has insignificant correlation with dividend payout. The study is useful to the individual investors, institutional investors and companies in terms of sound investment purpose.

Keywords

Dividend Pay-Out, Market Price, Growth, Earnings Per Share, Panel Data.

Full Text

References

Abor, J., & Bokpin, G. A. (2010). Investment opportunities, corporate finance, and dividend payout policy: Evidence from emerging markets. Studies in Economics and Finance, 27(3), 180–194.

Adnan Ali, F. A. (2015). Effect of dividend policy on stock prices. Business & Management Studies: An International Journal, 3(1), 56–87.

Al-Hasan, M. A., Asaduzzaman, M., & Karim, R. A. (2013). The effect of dividend policy on share price: An evaluative study. IOSR Journal of Economics and Finance (IOSR-JEF), 1(4), 6–11.

Al‐Najjar, B., & Hussainey, K. (2009). The association between dividend payout and outside directorships. Journal of Applied Accounting Research, 10(1), 4–19.

Anu, R. K. J., Sreejith, P. R., & Ananth, A. (2017). A research paper on impact of dividend policy determinants of listed companies on Indian capital market. Journal of Finance and Accounting, 5(2), 40–43.

Baker, H. K., & Kapoor, S. (2015). Dividend policy in India: New survey evidence. Managerial Finance, 41(2), 182–204.

Baker, H. K., Saadi, S., Dutta, S., & Gandhi, D. (2007). The perception of dividends by Canadian managers: New survey evidence. International Journal of Managerial Finance, 3(1), 70–91.

Baker, H. K., Saadi, S., Dutta, S., Gandhi, D., & Powell, G. E. (2012) Dividend policy in Indonesia: Survey evidence from executives. Journal of Asia Business Studies, 6(1), 79–92.

Bhattacharyya, N. (2007). Dividend policy: A review. Managerial Finance, 33(1), 4–13.

Black, F. (1976). The dividend puzzle. Journal of Portfolio Management, 2(2), 5–8. Retrieved from https://doi.org/10.3905/jpm. 1976.408558

Bombay Stock Exchange. (2018, March). Retrieved from bseindia: https://www.bseindia.com/

Fargher, N. L., & Weigand, R. A. (2009). Cross-sectional differences in the profits, returns and risk of firms initiating dividends. Managerial Finance, 35(6), 509–530.

Gayathridevi, A., & Mallikarjunappa. (2012). Contemporary Management Research, 6(2), 97.

Hussainey, K., Chijoke-Oskar, M., & Chijoke-Mgbame, A. M. (2011). Dividend policy and share price volatility: UK evidence. The Journal of Risk Finance, 12(1), 57–68.

Kishor, B. (1980). Corporate internal finance - A study of overall trends and retentions. Vikalpa, 5(3), 185–208.

Koerniadi, H., & Tourani-Rad, A. (2008). Earnings management and the market performance of stock dividend issuing firms: NZ evidence. Accounting Research Journal, 21(1), 4–15.

Kumar, S., & Khurana, P. K. (1979). Determinants of dividend policy in Indian chemical industry, a survey. Indian Journal of Commerce, 114–121.

Li, G. (2016). Growth options, dividend payout ratios and stock returns. Studies in Economics and Finance, 33(4), 638–659.

Masum, A. A. (2014). Dividend policy and its impact on stock price: A study on commercial banks listed in Dhaka Stock Exchange. Global Disclosure of Economics and Business, 3(1), 9–17.

Matthew, O. M., Enekwe, C. I., & Anyanwaokoro, M. (2014). Effect of dividend payment on the market price of shares: A study of quoted firms in Nigeria. IOSR Journal of Economics and Finance (IOSR-JEF), 5(4), 49–62.

Mishra, G. D. (1975). Investment financing and earnings behavior in corporate sector in India. IIT Kanpur, 1975.

Modigliani, M. H. (1961). Dividend policy, growth, and the valuation of shares. The Journal of Business, 34(4), 411–433.

Venkataramanaiah, C. L. M. (2018, January). Determinants of dividend policy in the Indian corporate sector: A study of companies listed on NIFTY 50, NSE. Indian Journal of Fiinance, 37–46.

Packkirisamy, A. R. (2010). The impact of firm size on dividend behaviour: A study with reference to corporate firms. Managing Global Transitions, 8(1), 49–78.

Pasricha, D. A. (2011). An empirical study of dividend policy models in Indian context with special reference to engineering industry. Applied Research in Finance BiAnnually, 3(2), 136–146.

Pourheydari, O. (2009). A survey of management views on dividend policy in Iranian firms. International Journal of Islamic and Middle Eastern Finance and Management, 2(1), 20–31s.

Singh, H. (2018, January 1). 30 highest dividend paying stocs in India, 2018. Dividend, Dividend & More|Samco. Retrieved from https://www.samco.in/knowledge-center/articles/highest-dividend-paying-stocks-in-india-2018/

Tsoukalas, D., & Sil, S. (1999). The determinants of stock prices: Evidence from the United Kingdom stock market. Management Research News, 22(5), 1–14.

Yusof, Y., & Ismail, S. (2016). Determinants of dividend policy of public listed companies in Malaysia. Review of International Business and Strategy, 26(1), 88–99.

Zakaria, Z., Muhammad, J., & Zulkifli, A. H. (2012). The impact of dividend policy on the share price volatility: Malaysian construction and material companies. International Journal of Economics and Management Sciences, 2(5), 1–8.

Impact of EVA or Traditional Accounting Measures on MVA - A Study of BSE Listed Companies

Abstract Views :155 | PDF Views:0

Authors

Avani Shah ¹

Affiliations
1 Institute of Commerce, Nirma University, Ahmedabad, Gujarat, IN

Source

Journal of Commerce and Accounting Research, Vol 9, No 3 (2020), Pagination: 33-40

Abstract

The main aim of this paper is to know the superior impact of economic value added (EVA) or traditional accounting measures (i.e. return on assets and earning per share) for value maximisation. Market value added (MVA) is used as an indicator to test the impact and relationship with these variables. The study considers 190 listed companies selected from BSE (A Group). The study used fixed effects and random effects model as well as the Hasuman test to find out the appropriate model for the study. This study also used ordinary least squares regression as well as simple linear regression to know the impact. The study also used correlation to measure the relationship between EVA, selected traditional accounting measures and controlled variables on MVA. The study finds no evidence in support of EVA as a superior indicator for value creation than traditional accounting measures. The study reveals that it is better to measure financial performance through traditional accounting measures than EVA. The study is useful to the managers who are in the process of maximizing the wealth of shareholders’ as well as to the investors for a sound investment decision. The study is useful to all the stakeholders’ who require financial results of the companies for various purpose. This study covers the required controlled variables and relates to the MVA with financial measures.

Keywords

Economic Value Added, Market Value Added, Traditional Accounting Measures, Value Maximisation, Performance Measurements, Controlled Variables.

Username
Password
Remember me