Impact of Dividend Policy on Market Price of Share- A Study of Engineering and Steel Industry

Abstract

The present paper is aimed at analyzing the impact of dividend policy and retained earnings on market price of share in Engineering and Steel industry in India during 2000 -2010. To measure the impact of dividend policy on Market Price of Share multiple regression method are used by taking DPS (Dividend per Share), RE (Retained Earnings per Share), as independent variable, and MPS (Market Price per Share) as dependent variables. To determine the proportion of explained variation in the dependent variable, the co-efficient of determination (R2) has been tested with the help of F value. The study shows a predominant influence of dividends and an absence of retained earning effect on share price. Dividends are found relatively more attractive among the shareholders. Therefore, shareholders are not indifferent towards dividend and retained earnings because they seems to be believing more in current returns than to the future unprecedented uncertainties.