Study on the dividend behaviour of selected textile mills in Coimbatore district, Tamil Nadu

Abstract

The focus of the present study is i) To find out the applicability of dividend models in the selected textile mills. ii) To find out whether the firms paying dividend face any liquidity problem. iii) The perception of managers about dividend payment and iv) Importance of determinants of dividend. A sample of 32 firms was selected on the basis of companies listed in the Coimbatore Stock Exchange and the availability of data both primary and secondary. Multiple regression was used to find out the appropriateness of the applicability of the dividend model. Karl Pearson’s correlation is used to verify the liquidity problem. Scaling technique is used to find out the determinants of dividend decision and to ascertain the dividend behavior through the perception of managers in determining dividend policies. The main findings are: i) Current dividend depends in part on current earnings and in part on the dividends of the previous year dividend. A company is generally reluctant to decrease dividend rate and it prefers a stable dividend policy. ii) The ranking of the dividend variables are: a) Availability of cash b) Current earnings c) Pattern of past dividends and d) Increasing equity base through retention

iii) Cash Flow Model is able to explain the current year dividend more, than other two models and iv) The companies do not face any liquidity problem because of dividend payment.