A study on Determinants of Dividend Policy of Indian Public and Private Sector Banks

Abstract

In this research study, the author compared the relationship between the dividend policy of Indian
public and private sector banks from the shareholder’s point of view. The shareholders are free to
invest in any sector. There is no legal constraint on them to invest only in public sector banks.
They are absolutely free to invest their money wherever they want. The author examined whether
it is beneficial for the shareholders to invest either in public sector banks or in the private sector
banks. This study analyzes 25 public sector and 11 private sector banks. So the total number of
banks in the research study is 36. The analysis in the research study is performed on the data from
the financial year 2002 – 2003 to financial year 2014 – 2015. In this research, the author has
employed the data of the first difference, i.e. non-stationary data. For data analysis, the author
used descriptive statistics, correlation and panel data regression methods. The evidence from this
research shows that in private sector banks there is more relationship between the shareholder’s
wealth and the dividend policy than in the public sector banks. By considering the 4 independent
variables used in the research study, the adjusted R2 value of private sector banks is more than the
public banks with respect to the dependent variable, which shows more relation between the
shareholder’s wealth and the dividend policy in private sector banks than the public sector banks.