Lintner (1956) proposed that dividenddepends to the limited extent on the organization’s present earnings and tosome degree on the previous year’s dividend. He additionally bargains thatorganizations likes to make periodic partial adjustments toward a target payoutratio instead of bigger changes in dividend payout. According to Lintner,managers may increase dividends once they are sure that they can sustain themat the new level consistently.Mishraand Narender : tested the Lintner’smodel of Dividend Payment on Public Sector Units (PSUs) in India.
The studyconcluded that, the number of Dividend Paying PSUs compared to the total numberof PSUs is quite small. The study also came to the conclusion that, theDividend Payment Ratio (DPR), remain constant for most of the companies, evenif the Earning per Share (EPS) figure shows a constant improvement. On theother hand Saxena (1999) found that, past revenue growth rate, future earningsforecast, how many shareholders a company has, and systematic risk act as theDeterminants of Dividend Payout Policy.Savita (2014) has made study on dividend signaling hypothesis.
Acase study of BSE SENSEX companies. The present study isattempts to contribute positively to the understanding of the behavior ofIndian share prices in relation to the dividend announcement.AdediranS.
A. and Alade S.O. (2013) Dividend Policy andCorporate Performance in Nigeria. These data were subjected to regressionanalysis, using e-view software and the findings indicate that; there is asignificant positive relationship between dividend policies of organizationsand profitability, there is also a significant positive relationship betweendividend policy and invest- ments and there is a significant positiverelationship between dividend policy and Earnings per Share.
Anil& Kapoor (2008) analyzed the dividendpayout ratio of all the companies belonging to the CNX IT index of NSE in theIndian IT sector over a period of six years from 2000 to 2006. They identifiedcurrent and anticipated earnings, liquidity and corporate tax, risk and growthas the key factors affecting the dividend payout ratio. The study revealed thatliquidity and risk were the most important determinants of dividend payout inthe Indian IT sector.
Thirumalvan& Sunita (2005) studied the impact ofShare repurchases & Dividend announcements on Stock prices in the contextof Indian IT sector during the period (2002-2004). They examined the signalingeffect of Stock repurchases and Dividend announcements. The study examined abnormalreturns across various repurchases level.
They have taken the firms listed inthe BSE Index for the purpose of empirical investigation. The study covers theimpact on stock prices five days prior and after the dividend announcement. Theresult exhibits the upward trend of share price movement after the dividendannouncement.
The crucial point of their findings is that positive signalingexisted only for a day after the announcements. After which the extent ofpositivism of shares starts declining. Their finding shows that market reactionin the Indian context to events or announcements such as share repurchases anddividends generally fluctuate around day or two. The study can be cited asimportant for the present study.