Impact of liquidity and profitability on dividend policy: an empirical study on select IT companies in india

Abstract

The current study examines the association among liquidity, profitability and dividend policy in one hand and determines the impact of liquidity and profitability on the dividend policy of select IT companies on the other hand. The sample size of this study is i.e. 19 Indian IT companies have been selected who have been generating profit on a continuous basis. This study is based on the secondary data collected from the annual reports and websites of the concerned companies. The study period is 12 years i.e. from 2008-09 to 2019-20. The data thus collected have been analyzed by correlation and multiple regression analysis. In this study, Current Ratio (CR), and Return on Assets (ROA) are taken as independent variables and Dividend Payout Ratio (DPR) is considered as dependent variable. The result shows that there is negative association between ROA and DPR, while there is positive association between CR and DPR. Further, the study reveals that liquidity and profitability together have lesser impact on the dividend policy. However, on individual basis ROA has significant impact on the dividend policy of select IT companies.