Corporate governance and payout policy: evidence from India

Purpose - The purpose of this paper is to study the impact of ownership structure and corporate governance on dividend policy in emerging markets, like India. The study also analyses the moderation effects of board independence between ownership and dividend payout. Design/methodology/approach - The data set of 1,546 Indian firms over the period of 2006-2017 has been used in this study. Tobit and logistic regression methods has been used. The data used in this study are collected from the Centre for Monitoring Indian Economy (CMIE) Prowess database. The sample firms are listed on Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). Findings - First, the study finds a significant positive influence of corporate governance on the decision to pay dividend and is an important determinant of the payout decision. Second, the study finds a significant negative relationship of family ownership with dividend payout decisions which indicates that family firms pay lower dividend. Finally, the result from the interaction effect of board independence with family ownership has significant positive influence on dividend policy. Originality/value - This is one of the first attempt to show that there is an interaction between independent board and ownership structure. It shows that more independent and non-executive directors in the board of family controlled firms are likely to pay more dividends.