IJMSS Vol.04 Issue-06, (June, 2016) ISSN: 2321-1784 International Journal in Management and Social Science (Impact Factor- 5.276) A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories International Journal in Management and Social Science http://www.ijmr.net.in email id- irjmss@gmail.com Page 397 DIVIDEND DETERMINANATS OF SELECT FIRMS LISTED ON NSE Naveen Kumar H K Designation: Research Scholar Address: DOS in Business Administration, [BIMS], University of Mysore, Manasagangotri, Mysore. Dr. Mahesh Rajgopal Designation: Associate Professor Address: DOS in Business Administration, [BIMS], University of Mysore, Manasagangotri, Mysore. ABSTRACT A dividend decision of a firm is an outcome of various considerations. These considerations differ across time and industry. The present study re-examines various factors that have a bearing on the dividend decision of a firm by using a two-step multivariate procedure. First factor analysis is performed on the data to extract prominent factors from various variables and then multiple regression is conducted on such factors. Results of factor analysis indicate that leverage, liquidity, profitability, growth and ownership structure are the major factors. Regression on these factors shows leverage and liquidity to be the determinants of the dividend policy for Indian companies. Key words: dividend policy, factor analysis, multiple regression, leverage, liquidity Introduction One of the central issues of corporate finance has been the dividend decision of a firm, which has always been studied in relation to a firm’ s financing and investment decisions. The association amongst these two decisions has posed various questions. How much should a firm pay as dividend? How does a dividend payout policy influence the valuation of a firm? Does a firm’ s decision to distribute cash correspond to its financing and investing decisions? What is the outcome of changes in the dividend policy assuming steady financing and investment decisions of a firm? Research has attempted to provide answers to these questions and many more but mystery still shrouds the dividend decision. Lintner (1956) argues that firms of developed markets target their dividend payout ratio with the help of current earnings and past dividends. In order to reach such target, various adjustments are made in the dividend policy of a firm and therefore firms should have stable dividend policies. Miller and Modigliani (1961) on the other hand feel that dividend policy is irrelevant in measuring the current worth of shares considering the irrational assumptions of market perfections, zero transaction costs, perfect certainty and indifferent behaviour of investors. However, Miller and Scholes (1982) argue that in the real world, dividend decision is inspired more by high taxes on dividends than capital gains and market imperfections. Alli, Khan and Ramirez (1993) observe that a change in the payout policy provides information about future earnings and a further change in the value of share price. This indeed shows a strong signaling effect of the dividend decision of a firm. It is evident that over the years, no Single viewpoint has emerged which explains the dividend policy of a firm. In India too, modest research has been carried out on various aspects of the dividend decision. The present study re- examines the impact of various factors on the dividend decision of Indian companies taking a large and latest data set. Our study contributes to the existing literature by examining as many as fifteen