A study of impacts of dividend policy on share prices of Indian companies

The term dividend refers to the part of profits of a company which is distributed by the company among its shareholders. Dividend policy is the policy used by a company to decide how much it will pay out to shareholders in dividends. The issue of how much a company should pay its stockholders, as dividend is one that has been of concern to managers for a long time. The optimal dividend policy of a firm may be defined as the best dividend payout ratio the firm can adopt. But, what does “best” mean in this concept? Since the objective of the firm is to increase the wealth of its stockholders, the best dividend policy is the one that increases shareholders wealth by the greatest amount. It is therefore necessary, to understand the nature of the relationship between dividend and value of the firm. The present study is mainly based on secondary data. This study attempts to evaluate the impacts of dividend on share price of the Indian company by using Mean, Standard Deviation and Paired ‘t’ test.