The influence of dividend policy on the efficiency of investment on the selected Automobile companies on Bombay Stock Exchange (BSE)




Dividend policy refers to management’s long-term decision on how to extend the amount of cash flows from business activities that is, how much to invest in the business, and how much to return to shareholders. The determination of the amount of dividends payable is an important decision that companies undertake since the objective of the firm is to maximize the shareholders’ wealth as measured by the price of the company’s common stock. The investment on the capital market is connected with investors’ taking risk of the depreciation of the invested capital. Taking such risk into consideration the investors expect a higher return rate from the one they can achieve from the investment in securities with zero risk, but which consequently characterize a lower return rate. The expected or realized return rate from investment in shares depends, first of all, on the changes of prices of quoted companies possessed by an investor in his portfolio.

In this article the impact and influence of Dividend policy on the efficiency of investment on the 5 selected Automobile companies in Bombay Stock Exchange (BSE) will be studied. The name of selected industries are:

1. TATA Motors 2. Ashok Leyland 3. Bajaj Auto LTD 4. Mahindra & Mahindra 5. Maruti Suzuki

The conclusion of this study shows that the influence of payout dividend in a bigger extend on the basis of P/E has more effectiveness than the P/BV in portfolio constructed.

Key terms: Dividend Policy, Efficiency of Investment, Portfolio.


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ISSN : 2251-1547