Effect of dividend policy on value of firm

Description
how the dividend policy affects the value of the firm

A

Management Project Research
ON
OF DIVIDEND POLICIES & CAPITAL STRUCTURE ON THE VALUE OF FIRM”
“IMPACT

SUBMITTED TOROF.NARESH SHAH

SUBMITTED BY: SATISH JAPADIYA(1306) JAIN AMIT(1333)

CENTRE FOR MANAGEMENT STUDIES DHARMSINH DESAI UNIVESITY 1 NADIAD (2011-2012)

PREFACE
To survive in a competitive environment, theoretical knowledge must be supplemented with practical knowledge. Being an MBA student, project study forms an essential part of our course and bridges the gap between theoretical knowledge and practical knowledge. Decision regarding dividend is very essential for any company. There are two views regarding the dividend policy. One group says that dividend policy is relevant to the firm value and other model says that it is irrelevant. The company should carefully decide how much dividend should be declared. This study will also help the investors in choosing their portfolio. This inspired us to take up this study on impact of dividend policy and it’s impact on firm value. The project includes a detailed research on the whether dividend policy affects the value of firm. We have tried to put in best of our efforts to understand the dividend policy of different companies. Errors and mistakes are part of human life and some errors might have crept in the report. Any queries with respect to this report are most welcomed.

2

ACKNOWLEDGEMENT
Any successful work is always a product of many hands coming together in co-operation and assistance. This work is no different. A number of people have put their efforts for accomplishment of this project. Their guidance and suggestions were highly helpful during the course. I express my deep sense of gratitude to Prof . Naresh Patel, H.O.D. of CMS DDU. I would also like to thank my faculty guide Prof. Naresh shah for his most valuable guidance, inspiring supervision, periodical monitoring and sparing his precious time in my management research project. I would also like to thank Prof .Falguni Pandya for their valuable guidance for the project. I also express my sincere gratitude to my friends for all the inspirations and giving me an opportunity to carry out the project report. Without their help, the project report would not have been possible.

Satish japadiya Amit jain

3

CERTIFICATE
This is to certify that the project report titled “Impact of dividend policy aon value of firm” has been prepared by Mr. Amit Jain and MR. Satish Japadiya a student of Centre for Management Studies, Dhramsinh Desai University bearing the Roll No. 1333,1306 under the guidance and supervision of Prof. Naresh shah.

Prof. Naresh shsh Faculty Guide Date:7/01/2012

Prof. Naresh Patel Head of Department Date:9/01/2012

4

DECLARATION
I hereby declare that this report titled “Impact Of Dividend Policies On The Value Of Firm” is a record of independent work carried out by me under the guidance and supervision of Prof. Naresh Shah , Project Guide, Centre for management studies, towards the partial fulfillment of requirements for the M.B.A. degree course of Dharmsinh Desai University at Nadiad. I further declare that this Project is the result of my own efforts and that it has not been submitted to any other university or institute for the award of a degree or any other similar title of recognition.

PLACE: Nadiad DATE:9/01/2012

AMIT JAIN SATISH JAPADIYA

5

EXECUTIVE SUMMARY
To pay or not to pay dividend is a critical decision any management takes. Maximizing the value of the firm or maximizing the shareholder’s wealth is the ultimate objective of any firm. So any decision of the management has to be valued on the basis of its effect on the value of the firm. Aim of the study is to understand the Impact of dividend policies on the value of the firm. Along with dividend other variables such as retained earnings, debt-equity and the return on equity share prices of the Indian public limited companies are studied to understand the relationship between the dividend and the share prices. The objectives of the study are to describe the samples in terms of its pattern of dividend distribution and debt and to find out the relationship between the dividend and debt & the return on the equity shares. The findings of the study can be used to understand the influence of dividend decisions and capital structure decisions on the value of the firm. A descriptive research, which is quantitative in nature, was conducted. Convenient sample of 25 companies from 5 sectors (automobile sector, FMCG sector, oil and gas sector, pharma sector, power sector) shares of which are traded in Bombay Stock Exchange is studied. The historical data is collected from the web site of the Bombay Stock Exchange. The relationship between the Value of the firm & Dividend Policies of the firm and the capital structure of the firm is studied using Multiple Regression model. Results of the study show that there is no evidence of significant association between dividend policies on the value of the firm. The findings include multiple regression interpretation and time series interpretation for each of the sample companies separately for each five years.

6

INDEX
SR. NO i ii iii vi v CHAPTER -1 PARTICULARS PREFACE ACKNOWLEDGEMENT CERTIFICATE DECLARATION EXECUTIVE SUMMARY INTRODUCTION 1.1 Background Of The Study 1.2 How Shareholders Wealth grows 1.3Dividend 1.4Factors Affecting Dividend Policy 1.5Capital Structure(Debt-Equity) LITERATURE REVIEW 2.1 Relevancy Of Dividend 2.2 Irrelevance Of Dividend 2.3 Capital Vs Firm Value RESEARCH METHODOLOGY 3.1 Problem statement 3.2 Rational for study 3.3 Research objective 3.4 Hyphothesis 3.5 Scope of study 3.6 Research methodology 3.7 Statistical analysis 3.8 Sampling design 3.9 Data collection 3.10 Limitation of study 3.11 Software tools INDUSTRY PROFILE 4.1 Automobile Sector 4.2 FMCG Sector 4.3 Oil And Gas Sector Sector 4.4 Pharmaceutical 4.5 Power Sector
7

CHAPTER -2

CHAPTER -3

CHAPTER -4

PG.NO. 01 02 03 04 05 09 10 11 12 13 17 18 19 21 23 25 26 26 27 27 27 27 28 28 28 28 28 29 30 31 32 33 34

CHAPTER -5

CHAPTER -6

CHAPTER -7

DATA INTERPRETATION AND ANALYSIS 5.1Time Series Regression Analysis 5.2 Cross Sectional Regression Analysis FINDINGS,RECOMMENDATION,CONCLUSION 6.1 FINDINGS 6.2 RECOMMENDATION 6.3 CONCLUSION BIBLIOGRAPHY

35 36 114 189 190 197 198 200

8

9

1.1

BACKGROUND OF STUDY :-

Dividend is that portion of profits of a company which is distributed among its shareholder according to the decision taken and resolution passed in the meeting of BOD. This may be paid as a fixed percentage on the share capital contributed by them or at a fixed amount per share. It means only profits after meeting all the expenses and providing for taxation and for depreciation and transferring a reasonable amount to reserve funds should be distributed to shareholders as dividend. There is always a problem before the top management to decide how much profits should be transferred to Reserve funds to meet any unforeseen contingencies and how much should be distributed to shareholder. Payment of dividend is desirable because it affects the goodwill of the firm in the market on the one hand, and on the other, shareholders invest their funds in the company in a hope of getting a reasonable return. Retained earnings are the sources of internal finance for the financing of corporate future projects but payment of dividend constitute an outflow of cash to shareholders. Although both-expansion and payment of dividend-are desirable, these two are in conflicts. It is, therefore, one of the important functions of the financial management to constitute a dividend policy which can balance these two contradictory view points and allocate the reasonable amount of profits after tax between retained earnings and dividend. The objective of any dividend policy should be to increase the share holder’s return. Share holder’s return has two components; dividends and capital gains. There are many reasons for paying dividends and many reasons for not paying dividends. Hence, `dividend policy' is controversial. A higher payout of dividend means lower retained earnings which may affect the growth of the firm and perhaps a lower market price per share. The decision becomes more critical when there exists an investment opportunity to the firm. If the profits earned is distributed to investors then the retained earnings to that extent will be reduced which will result in increasing debt to finance the investment opportunity. On the other hand the investor’s requirement also must be satisfied by providing the optimum dividend. All these factors which go through the minds of the share holders will be reflected in the market price of the shares. Thus the dividend decision is very vital to any organization.

10

1.2

HOW SHAREHOLDERS' WEALTH GROWS:Shareholders benefit financially from their investment in successful companies in three main ways:

• Dividends, which are a distribution of part of a company's net profit to shareholders, as part owners of the company. Most large industrial companies pay dividends twice yearly, and often these dividends have tax advantages as well. • Capital growth, which is the increase in the market value of a company's shares over the total cost of those shares. It usually reflects the growth in the company's profits and assets, but it can also be affected by a change in the sentiment of the whole share market as it goes through its cycles. Prices of shares are determined by many factors which are interrelated to each other. • New Issues of shares, which may be made by a company when it requires further funds. Such new shares are usually offered at a discount to existing shareholders, based on a predetermined ratio, without having to pay brokerage. The entitlements to the new shares offered are known as Rights, as shareholders have the right to acquire the shares or to sell the rights to these new shares on the stock market. A company may also make a Bonus Issue to shareholders at no cost.

11

1.3Dividend :Companies that earn a profit can do one of the three things; pay that profit out to shareholders, reinvest it in the business through expansion, or both. When a portion of the profit is paid out to shareholders, the payment is known as a dividend. The dividend is a variable income, the amount of which depends on the amount of annual profit made by the company. The dividend corresponds to the share of income that the Annual General Meeting opts to distribute to shareholders. The remainder is placed in reserve and used to increase equity in order to finance the company’s development. By definition dividend is the payment made by a firm to its owners, either in cash or in stock. It is also referred to as the income component of the return on an investment in stock. Dividend is a taxable payment declared by a company's board of directors and given to its shareholders out of the company's current or retained earnings. Companies are not required to pay dividends. The companies that offer dividends are most often companies thathave progressed beyond the growth phase, and no longer benefit sufficiently by reinvesting their profits, so they usually choose to pay them out to their shareholders. The term "dividend" usually refers to a cash distribution of earnings. If it comes from other sources, it is called "liquidating dividend". It mainly has the following types: Regular: Regular dividends are those the company expects to maintain, paid quarterly (sometimes monthly, semi-annually or annually). Extra: Those that may not be repeated. Special:A nonrecurring dividend that is exceptional in terms of either size or date issued. Stock dividend: Paid in shares of stocks, increases the number of shares outstanding and reduce the stock price. The various terms with regard to Dividends are as follows:Cum dividend: Phrase used to indicate that a stock is selling with a recently declared right or dividend. Ex dividend: A security that no longer carries the right to the most recently declared dividend; or the period of time between the announcement of the dividend and the payment. Indicative dividend: The total amount of dividends that would be paid on a share of stock over the next 12 months if each dividend were the same amount as the most recent dividend. Interim dividend: A dividend, which is declared and distributed before the company's annual earnings have been calculated; often-distributed quarterly. Omitted dividend: A dividend which was expected, but which was not declared, usually due to financial difficulties. Also called passed dividend.
12

Optional dividend: Dividend which the shareholder can choose to take as either cash or stock. Participative dividend: Dividend paid on participating preferred stock. This is an unusual dividend structure, since it allows holders of preferred stock to receive payouts in addition to the stated dividend rate under certain circumstances. Trading dividend: The practice by some corporations of buying and selling other corporations' stock to maximize collected dividends, for tax benefits (since corporations pay very little tax on dividend income). It is also called dividend capture.

13

1.4 FACTORS AFFECTING DIVIDEND POLICY :1.Stability of earnings. The nature of business has an important bearing on the dividend policy. Industrial units having stability of earnings may formulate a more consistent dividend policy than those having an uneven flow of incomes because they can predict easily their savings and earnings. Usually, enterprises dealing in necessities suffer less from oscillating earnings than those dealing in luxuries or fancy goods. 2. Age of corporation. Age of the corporation counts much in deciding the dividend policy. A newly established company may require much of its earnings for expansion and plant improvement and may adopt a rigid dividend policy while, on the other hand, an older company can formulate a clear cut and more consistent policy regarding dividend. 3. Liquidity of funds. Availability of cash and sound financial position is also an important factor in dividend decisions. A dividend represents a cash outflow, the greater the funds and the liquidity of the firm the better the ability to pay dividend. The liquidity of a firm depends very much on the investment and financial decisions of the firm which in turn determines the rate of expansion and the manner of financing. If cash position is weak, stock dividend will be distributed and if cash position is good, company can distribute the cash dividend. 4. Extent of share distribution. Nature of ownership also affects the dividend decisions. A closely held company is likely to get the assent of the shareholders for the suspension of dividend or for following a conservative dividend policy. On the other hand, a company having a good number of shareholders widely distributed and forming low or medium income group, would face a great difficulty in securing such assent because they will emphasise to distribute higher dividend. 5. Needs for additional capital. Companies retain a part of their profits for strengthening their financial position. The income may be conserved for meeting the increased requirements of working capital or of future expansion. Small companies usually find difficulties in raising finance for their needs of increased working capital for expansion programmes. They having no other alternative, use their ploughed back profits. Thus, such Companies distribute dividend at low rates and retain a big part of profits. 6. Trade cycles. Business cycles also exercise influence upon dividend Policy. Dividend policy is adjusted according to the business oscillations. During the boom, prudent management creates food reserves for contingencies which follow the inflationary period. Higher rates of dividend can be used as a tool for marketing the securities in an otherwise depressed market. The financial solvency can be proved and maintained by the companies in dull years if the adequate reserves have been built up. 7. Government policies. The earnings capacity of the enterprise is widely affected by the change in fiscal, industrial, labour, control and other government policies. Sometimes government restricts the distribution of dividend beyond a certain percentage in a

14

particular industry or in all spheres of business activity as was done in emergency. The dividend policy has to be modified or formulated accordingly in those enterprises. 8. Taxation policy. High taxation reduces the earnings of the companies and consequently the rate of dividend is lowered down. Sometimes government levies dividend-tax of distribution of dividend beyond a certain limit. It also affects the capital formation. 9. Legal requirements. In deciding on the dividend, the directors take the legal requirements too into consideration. In order to protect the interests of creditors an outsiders, the companies Act 1956 prescribes certain guidelines in respect of the distribution and payment of dividend. Moreover, a company is required to provide for depreciation on its fixed and tangible assets before declaring dividend on shares. It proposes that Dividend should not be distributed out of capita, in any case. Likewise, contractual obligation should also be fulfilled, for example, payment of dividend on preference shares in priority over ordinary dividend. 10. Past dividend rates. While formulating the Dividend Policy, the directors must keep in mind the dividend paid in past years. The current rate should be around the average past rate. If it has been abnormally increased the shares will be subjected to speculation. In a new concern, the company should consider the dividend policy of the rival organisation. 11. Ability to borrow. Well established and large firms have better access to the capital market than the new Companies and may borrow funds from the external sources if there arises any need. Such Companies may have a better dividend pay-out ratio. Whereas smaller firms have to depend on their internal sources and therefore they will have to built up good reserves by reducing the dividend pay-out ratio for meeting any obligation requiring heavy funds. 12. Policy of control. Policy of control is another determining factor is so far as dividends are concerned. If the directors want to have control on company, they would not like to add new shareholders and therefore, declare a dividend at low rate. Because by adding new shareholders they fear dilution of control and diversion of policies and programmes of the existing management. So they prefer to meet the needs through retained earnings. If the directors do not bother about the control of affairs they will follow a liberal dividend policy. Thus control is an influencing factor in framing the dividend policy. 13. Repayments of loan. A company having loan indebtedness are vowed to a high rate of retention earnings, unless one other arrangements are made for the redemption of debt on maturity. It will naturally lower down the rate of dividend. Sometimes, the lenders (mostly institutional lenders) put restrictions on the dividend distribution still such time their loan is outstanding. Formal loan contracts generally provide a certain standard of liquidity and solvency to be maintained. Management is bound to hour such restrictions and to limit the rate of dividend payout.
15

14. Time for payment of dividend. When should the dividend be paid is another consideration. Payment of dividend means outflow of cash. It is, therefore, desirable to distribute dividend at a time when is least needed by the company because there are peak times as well as lean periods of expenditure. Wise management should plan the payment of dividend in such a manner that there is no cash outflow at a time when the undertaking is already in need of urgent finances. 15. Regularity and stability in dividend payment. Dividends should be paid regularly because each investor is interested in the regular payment of dividend. The management should, in spite of regular payment of dividend, consider that the rate of dividend should be all the most constant. For this purpose sometimes companies maintain dividend equalization Fund.

16

1.5 CAPITAL STRUCTURE (DEBT-EQUITY)
Another important variable, which affect the value of the firm, is the capital structure of the firm. Finance theory tells us that, in the absence of bankruptcy costs, corporate income taxation, or other market imperfections, the value of a firm is independent of its financial structure. The theory is intuitive, because real assets determine a firm’s value; it cannot be changed by purely financial transactions. In other words, financial assets on the right side of the balance sheet have value only because of the real assets, including intangibles and growth opportunities, on the left side. Therefore, if markets are doing their job, it should not be possible to create value by shuffling the paper claims on the firm's real assets. However, if there are imperfections such as taxes, underdeveloped financial markets, and inefficient legal systems financial structure becomes relevant. Firms must decide whether to issue debt or equity securities to minimize the costs entailed by these imperfections.

17

18

CHAPTER 2: LITERATURE REVIEW
2.1 RELEVANCY OF DIVIDEND
This approach purports that the value of the firm is affected by the dividend policy and the optimal dividend policy is the one, which maximizes the firm’s value. These variables consider dividend decisions to be an active variable in determining the value of a firm. Two famous models in support of this are explained below. Walter Model (James & Walter, 1963) (Extracts from James Walter,” Dividend Policy: It’s Influence on the Value of the Firm,” Journal of Finance (May 1963), 280-291) Walter model supports that the dividend policy of the firm is relevant. The investment policy of the management cannot be separated from its dividend policy and both are interrelated. Thus the choice of dividend policy does affect the value of the firm. Walter model is built around certain assumptions such as constant return, constant cost of capital, constant earnings and dividend. He also made an assumption that financing of new investment is done through retained earnings and debt and no new equity shares are being issued. Walter in his argument explains three situations. • If the return on investment exceeds the cost of capital then the firm has to retain the earnings and should not be distributed as dividends. • If the cost of capital exceeds the return on investment then the firm has to pay the entire earnings as dividend • If the return on investment and the cost of capital is same then rate of dividend payout can be 0 to 100. According to this model if the firm retains the earnings it gives a signal that the investment opportunities are more and it increases the share prices. Similarly when the firm distributes the entire earnings as dividend, share prices will automatically increase, as the income on the shares are more. The Walter model is criticized on the unrealistic assumptions on which it is made such as no debt financing, constant return, cost of capital and earnings etc… are not practically possible. Gordon Model(Gordon Myron J, 1962) (Extract from M.J.Gordon, The Investment, Financing and Valuation of the Corporation, Homewood, III, Richard Irwin,1962) Myron Gordon (1962) came up with a dividend relevance model which is popularly known as the “bird in the hand argument”. The crux of the argument is that the • Investors are risk averse and • They put a premium on the “certain” returns and discount or penalize the “uncertain” returns Gordon says that the current dividends are certain and the reinvestment of current dividend for future returns is uncertain. Thus the investors would be inclined to pay higher prices for shares on which current dividends are paid and discounts the value of
19

the shares on which dividends are postponed. This model is based on the belief that a bird in the hand worth two in the bush. Thus incorporating the uncertainty into the model, Gordon concludes that the dividend policy affects the value of the firm. His model justifies the behavior of investors who value a rupee of dividend income more than a rupee of capital gains income, because dividends are less uncertain when compared to capital gains. However this model is also not free of criticism because of the assumptions on which it is based.

20

2.2 IRRELEVANCE OF

DIVIDEND Dividend irrelevance approach implies that the value of the firm is unaffected by the distribution of dividends and is determined by the earning power and risk of its assets. It is based on the assumption that the investors are indifferent between dividends and capital gains. So long as the firm is able to earn more than the equity capitalization rate, the investors would be content with the firm retaining the earnings. MM Hypothesis (Modigliani and Miller, 1961) (Extracts from M.H.Miller and F. Modigliani, “Dividend Policy, Growth and the Valuation of Shares”, Journal of Business, vol 34 (October 1961), 411-433.) Modigliani and Miller argued that the dividend decisions have no effect on the share prices of the firm and therefore no consequence. According to them it is the investments policy through which a firm can increase its earnings and there by the value. Under the conditions of perfect capital market, rational investors, absence of tax discrimination between the dividend income and capital appreciation, given the firm’s investment policy, its dividend policy may have no influence on the market price of the shares.

The crux of the argument is the arbitrage process. When the earnings are paid out as dividend, the funds required for additional investment has to be raised from either sale of new shares or additional loans, thus the two acts offset or balance each other. Rational investors prefer more wealth to less wealth and they know that the present value of prospective dividends is the terminal value of the shares. MM argue that when dividends are paid out, the market prices of the shares will decrease. What is gained by the investors as a result of dividends will be neutralized completely by the decrease in the terminal value of the shares. The market price before and after the payment of dividend is same and the investors are indifferent between dividend and the retained earnings. As the investors are indifferent, the wealth would not be affected by the current and future dividend policies. It would entirely depend up on the expected future earnings. Thus MM says that the difference in current and the future dividend policies can not affect the market price of the shares as the present value of the prospective dividends is nothing but the terminal value of the shares. The assumption under which the MM hypothesis lies is highly unrealistic and untenable in practice. As a result the conclusion that the dividend payment and the other methods of finance will exactly offset and hence the dividend is irrelevant is not a practical proposition. The validity of MM hypothesis is criticized on imperfections of market also.

21

OTHERS
Gragg & Malkeil in their paper on “Expectations and Structure of Share Prices” present the results of an empirical study of year-end common stock prices from 1961 to 1965. The ratios of market prices earnings are related to such factors as earnings growth, dividend pay out, and various proxy variables designed to measure the quality of the return. They demonstrate in the study that it is possible to explain, for several successive years the percentage of variability in market price earnings ratios with the variables included in the study. David & Julio (2004) University of Illinois and Urbana Champaign in their paper on “Reappearing Dividends” studied the reappearing phenomenon on United States of America. They observed that the cash dividend paid by the US companies during 1984 to 1999 has fallen down from 32% to 16.%. But after reaching a low percentage of 15% in 2001 now the dividend payout ratios have increased to 20% in first quarter of 2004. In their study they found out that the downward trend in dividends experienced a sharp reversal with the new millennium. They have also identified certain reasons such as tax cut in dividends, investment opportunities, corporate governance etc… responsible for the reappearing of dividend. S M Gupta (1989) studied the behavior of retained earnings in private sector and public limited companies in India, for a period from 1975-76 to 1984-85. The results showed that the retention ratio (retained earnings / Net profit after tax) moved from 62.22 to 31.87 percentage with an average of 53.27. The overall study concluded that the corporations’ tries to stabilize the dividends over a period and any increase in profits go to the retained earning for reinvestment in the business. It is also observed that the constant profit earning industries maintained a retention ratio; but low profit earning industries or loss incurring industries neither maintained any retention ratio nor maintained dividend payout ratios.

22

2.3 CAPITAL STRUCTURE vs. FIRM’S VALUE
The two principal sources of finance for a company are equity and debt. What should be the proportion of equity and debt in the capital structure of the firm? One of the key issues in the capital structure decision is the relationship between the capital structure and the value of the firm. There are several views on how this decision affects the value of the firm. Modigliani_Miller Optimal Capital Structure Theory (Extracts from Modigliani, F. and Miller.M. H. (1958),The Cost of Capital, Corporate Finance and the Theory of Investment. American Economic Review, 48, 261-97) Optimal capital structure theory of Modigliani-Miller suggest there exist an optimal leverage at which the firm obtains a maximum value by minimizing its weighted average costs of capital, given the market imperfections and tax deductibility of interest costs from pre-tax income of firms. The proposition asserts that the value of a firm with tax-deductible interest is equal to the value of an all-equity firm as enhanced by the tax savings. According to this approach, the capital structure decision of a firm is irrelevant. This approach supports the NOI approach and provides a behavioral justification for it. This approach indicates that the capital structure is irrelevant because of the arbitrage process which will correct any imbalance i.e. expectations will change and a stage will be reached where further arbitrage is not possible. Durand D (1959) identified two views; Net income approach and Net operating approach. Under the Net income approach the cost of debt and the cost equity are assumed to be independent to the to the capital structure. This approach says that the weighted average cost of capital of the firm declines and the total value of the firm rise with increased use of leverage. Under the Net operating income approach, the cost of the equity is assumed to increase linearly with leverage. As a result, the weighted average cost of capital remains constant and the total value of the firm also remains constant as the leverage is changed. Davidson N W, et.al., (1994) in their report on “The effect of firm and industry debt ratios on market value” analyzed 183 firms and studied the effect of debt ratios to the market value of the firm. Overall conclusion of the study is that the relationship of the firm’s debt level and that of its industry does not appear to be of concern to the market. Arsiraphoongphisit O & Ariff M (2003) in their report on “Optimal capital structure and firm value- an Australian evidence, 1991-2003” (Corporate Finance) analyzed 654 observations for a period of 1991 to 2003 in Australian market on the effect of capital structure change and firm’s value. The findings indicate that the market reacts positively to announcements of financing that lead to capital structure moving closer to their relative industrial Debt-Equity ratio. Thus market perceives and reacts positively to the optimal debtequity ratio. Thus debt-equity ratio has an impact on market value of the firm. It is evident from the above review of the literature that there exists certainly a contradicting
23

view on the impact of the dividend policy of a firm on the value of the firm. Thus we can see that there exists a knowledge gap in the subject. Hence, this research “Impact of dividend policies on the value of firm” is conducted to know which of the view holds good.

24

25

3.1 PROBLEM STATEMENT
There exist conflicting views with regard to the impact of dividend decisions on the value of the firm. Some are of the opinion that dividends do affect the market price of the shares while others argue it does not. Thus there exists a knowledge gap. The research problem under consideration is as follows. “To what extent does the dividend decision affect the value of the different sector companies’’

3.2RATIONAL FOR STUDY
How share prices differ from each other? To what extent financial decisions of the management have a bearing on the share holder’s wealth? These are some of the several questions that arise in the minds of the investors and other stakeholders of the firm. Maximizing Share holders’ wealth or the total value of the firm being the final goal, all the decisions of the management is directed towards it. It is always believed that the market value of shares reflects the reactions of the investors to each and every decision the management takes. The major decision of financial management is the dividend decision, in the sense that the firm has to choose between distributing the profits to the share holders and plaguing back the profits in to the business. The choice would obviously hinge on the effect of the decision on the maximization of share holders wealth. A firm will be well advised to distribute the net profits as dividend if such a distribution results in maximizing the share holders wealth; if not it would be better to plough back the profits into the business for future investment and growth. On the relationship between the dividend policy and value of the firm different theories have been advanced. One school of thought treats it as relevant and the other as irrelevant. There are two extreme views, that is; a) dividend are good as it increases the shareholder value; b) dividends are bad as it decreases the shareholders value. The crux of the arguments is whether to distribute the earnings or retain the earnings. Another important financial decision is capital structure decision. Under normal conditions the earnings per share increases when the leverage is more. More debt or leverage also increases the risk of the firm. Thus it cannot be clearly said whether the value of the firm increases with leverage. As the objective of the firm is to increase the value of the firm, the capital structure or leverage decision should be examined from the point of view of its impact on the value of the firm. If the capital structure affects the value of the firm, then every firm will try to achieve the optimal capital structure which maximizes the value of the firm. Thus, there exist conflicting theories on the relationship between the capital structure and the value of the firm. Thus there exists a research gap and the purpose of the current study is therefore to describe whether the dividend decisions really influence the value of the firm or not. In this study an attempt has also been made to understand the relationship between the capital structure and the value of the firm. So here this study will helpful in understanding that the how dividend policies in different sectors affects the value of firm. The study willalso cover the effect of capital structure on value of firm.
26

3.3 RESEARCH OBJECTIVE
a) To describe the samples selected in terms of the financial ratios. b) To explain the dividend distribution / retention and the debt equity patterns of the samples. c) To understand the relationship between the dividend policies of the company and the value of the firm. d) To study the effect of capital structure decision on the value of the firm.

3.4 HYPOTHESIS
H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm.

3.5 SCOPE OF THE STUDY
An attempt is made to understand increase or decrease in the share price due to the different dividend payout ratios.The scope of the study is macro and general in nature. The scope of the study includes the following:a. The ratios such as dividend payout, retention ratio, debt equity ratios and return on the shares are studied. b. The sector-wise impact of dividend on return on equity shares is studied. c. The findings of the study can be used to understand the influence of dividend decisions and capital structure on the value of the firm. d. This study is restricted to only those stocks which are listed in BSE. e. Time frame of the study is 2006/07 to 2010/11

3.6RESERCH METHODOLOGY
TYPE OF RESEARCH Type of research is Descriptive research, which is Quantitative in nature.

3.7 STATISTICAL ANALYSIS
Statistical model used:The model used here is multiple - regression model.
27

The regression equation for the study is as under. Y = a + b1 X1 + b2 X2 Y = Actual Return on Equity X1 = Debt-Equity Ratio X2 =Dividend Payout Ratio As there exist high correlation between the dividend payout and retention ratio there will be Multi Co-linearity effect on the regression analysis. To avoid this retention ratio is not included in the regression model.

3.8SAMPLING DESIGN
Sampling Unit- Companies listed on Bombay Stock exchange (BSE). Sampling Size– In this study 25 companies has been selected from 5 different sectors which are listed in Bombay stock exchange. Sampling Technique - Convenience Sampling.

3.9 DATA COLLECTION:SECONDARY DATA COLLECTION :-Secondary Data I. Income statements of companies II. Balance sheets of companies III. Historical stock prices

3.10 LIMITATIONS OF THE STUDY
1. Study is limited to only 5 sectors (Automobile, FMCG, Oil and Gas, Pharmaceutical and Power sectors) . 2. The study has taken only five years data of 25 companies to explain the phenomenon. 3. The sampling technique used is a convenient sampling technique, which limits the generalization of the findings. 4. The data collected are historical data and no adjustment is made to capture the abnormal events which affect the variables under study.

3.11 SOFTWARE TOOLS
Statistical Software: SPSP 17 software

28

INDUSTRY PROFILE

INDUSTRY PROFILE
29

4.1 AUTOMOBILE SECTOR
Over a period of more than two decades the Indian Automobile industry has been driving its own growth through phases. The entry of Suzuki Corporation in Indian passenger car manufacturing is often pointed as the first sign of India turning to a market economy. Since then the automobile sector witnessed rapid growth year after year. By late-90's the industry reached self reliance in engine and component manufacturing from the status of large scale importer. With comparatively higher rate of economic growth rate index against that of great global powers, India has become a hub of domestic and exports business. The automobile sector has been contributing its share to the shining economic performance of India in the recent years. With the Indian middle class earning higher per capita income, more people are ready to own private vehicles including cars and two-wheelers. Product movements and manned services have boosted in the sales of medium and sized commercial vehicles for passenger and goods transport. Side by side with fresh vehicle sales growth, the automotive components sector has witnessed big growth. The domestic auto components consumption has crossed rupees 9000 crores and an export of one half size of this figure.

GROWTH IN THE SECTOR:At present the industry is enjoying a growth rate of 14-17% per annum, with domestic sales growth at 12.8%. The growth rate is predicted to double by 2015. As it is seen, the total sales of passenger vehicles - cars, utility vehicles and multiutility vehicles - in the year 2005 reached the mark of 1.06 million. The current growth rate indicates that by 2012 India will overtake Germany and Japan in sales volumes. Apart from domestic production, the industry is consistently focusing on the automobile exports. The auto component segment is contributing a lot in the export arena. The liberalized policies of the government are now making the companies go for more and more exports. India, in auto sector, is turning to be a sourcing base for the global auto majors. The passenger car and the motorcycle segment is set to grow by 8-9 per cent in coming couple of years, says the ICRA report. The industry is likely to maintain the growth momentum picked up in 2002-03.

4.2 FMCG SECTOR
30

The Indian FMCG sector is the fourth largest sector in the economy with a total market size in excess of US$ 13.1 billion. It has a strong MNC presence and is characterised by a well established distribution network, intense competition between the organised and unorganised segments and low operational cost. Availability of key raw materials, cheaper labour costs and presence across the entire value chain gives India a competitive advantage. The FMCG market is set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billion in 2015. Penetration level as well as per capita consumption in most product categories like jams, toothpaste, skin care, hair wash etc in India is low indicating the untapped market potential. With 200 million people expected to shift to processed and packaged food by 2010, India needs around US$ 28 billion of investment in the food-processing industry.

GROWTH PROSPECTS
With the presence of 12.2% of the world population in the villages of India, the Indian rural FMCG market is something no one can overlook. Increased focus on farm sector will boost rural incomes, hence providing better growth prospects to the FMCG companies. Better infrastructure facilities will improve their supply chain. FMCG sector is also likely to benefit from growing demand in the market. Because of the low per capita consumption for almost all the products in the country, FMCG companies have immense possibilities for growth. And if the companies are able to change the mindset of the consumers, i.e. if they are able to take the consumers to branded products and offer new generation products, they would be able to generate higher growth in the near future. It is expected that the rural income will rise in 2009, boosting purchasing power in the countryside. However, the demand in urban areas would be the key growth driver over the long term. Also, increase in the urban population, along with increase in income levels and the availability of new categories, would help the urban areas maintain their position in terms of consumption. At present, urban India accounts for 66% of total FMCG consumption, with rural India accounting for the remaining 34%. However, rural India accounts for more than 40% consumption in major FMCG categories such as personal care, fabric care, and hot beverages. In urban areas, home and personal care category, including skin care, household care and feminine hygiene, will keep growing at relatively attractive rates. Within the foods segment, it is estimated that processed foods, bakery, and dairy are long-term growth categories in both rural and urban areas.

4.3 OIL & GAS SECTOR
31

The oil and gas industry has been instrumental in fuelling the rapid growth of the Indian economy. The petroleum and natural gas sector which includes transportation, refining and marketing of petroleum products and gas constitutes over 15 per cent of the GDP. Petroleum exports have also emerged as the single largest foreign exchange earner, accounting for 17.24 per cent of the total exports in 2007-08. Growth continued in 2008-09 with the export of petroleum products touching US$ 18.34 billion during April-September 2008. India's domestic demand for oil and gas is on the rise. As per the Ministry of Petroleum, demand for oil and gas is likely to increase from 176.40 million tonnes of oil equivalent (mmtoe) in 2007-08 to 233.58 mmtoe in 2011-12. India is emerging as the global hub for oil refining with capital costs lower by 25 to 50 per cent over other Asian countries. Already, the fifth largest country in the world in terms of refining capacity, with a share of 3 per cent of the global capacity, India is likely to boost its refining capacity by 45 per cent or 65.3 mtpa (million tonne per annum) over the next five years, according to a Deutsche Bank report.

ROLE OF OIL AND NATURAL GAS INDUSTRY IN INDIA GDP
India is the 6th largest consumer of petroleum By the year 2010, India is expected to rank 4th in terms of consumption of energy. The contribution of the Indian Oil and Natural Gas Industry is nearly US$ 13.58 billion. Indian petroleum demand depends around 70% on import of oil and natural gas. Presently India is trying to grab a share of the oil and gas fields from Central Asia to Myanmar and Africa .India is one of the largest investors in oil fields located abroad. Most of the Government owned oil companies have share in the oil and gas fields in different places of the world such as Sudan, Egypt, Libya, Ivory Coast, Vietnam, Myanmar, Russia, Iraq, Qatar, and Australia .India has 20 % share in Sakhalin-I oil project in Russia.

ROAD AHEAD
According to a recent CII-KPMG report India's energy sector will provide investment avenues worth US$ 120 billion-US$ 150 billion over the next five years. According to the Investment Commission of India, the total opportunity in the oil and gas sector is expected to reach US$ 35 billion to US$ 40 billion by 2012.

32

4.4 PHARMACEUTICAL SECTOR
Accounting for two percent of the world's pharmaceutical market, the Indian pharmaceutical sector has an estimated market value of about US $8 billion. It's at 4th rank in terms of total pharmaceutical production and 13th in terms of value. It is growing at an average rate of 7.2 % and is expected to grow to US $ 12 billion by 2010.Over the last two years the pharmaceutical market value has increased to about US $ 355 million because of the launch of new products. According to an estimate, 3900 new generic products have been launched in the past two years. These have been by and large launched by big brands in the pharma sector. And in the year 2005 Indian pharmaceutical companies captured around 70% of the domestic market. The Indian Pharmaceutical Industry is capable to meet the country's demand for every drug. The manufacturing units within the country are meeting about 80% of the country's drug requirements. The drug production sector is equipped with technology and researched knowledge base. The industry produces drugs worth rupees 18000 crores and is growing at 9 per cent every year. It offers quality products with internationally accepted quality standards. The Indian Pharmaceutical sector is highly fragmented with more than 20,000 registered units. It has expanded drastically in the last two decades. The leading 250 pharmaceutical companies control 70% of the market with market leader holding nearly 7% of the market share. It is an extremely fragmented market with severe price competition and government price control.

FUTURE OF PHARMACEUTICAL INDUSTRY
As per the present growth rate, the Indian Pharma Industry is expected to be a US$ 20 billion industry by the year 2015 .The Indian Pharmaceutical sector is also expected to be among the top ten Pharma based markets in the world in the next ten years. The national Pharma market would experience the rise in the sales of the patent drugs. The sales of the Indian Pharma Industry would worth US$ 43 billion within the next decade.With the increase in the medical infrastructure, the health services would be transformed and it would help the growth of the Pharma industry further.

33

4.5 POWER SECTOR
With the growing demand of power, there is huge potential of investment in the power sector of India. Power sector is in the concurrent list of the Indian Constitution. So it is under the purview of both the central government and the state government. The power sector of India is mainly dominated by the public sector undertakings, though slowly the private sectors are also coming up. The state and the central government generate nearly 90% of power. The private sector is accountable for only 10% generation. The funds of the power sector are fulfilled through budgets and other external borrowings. There has been a significant growth in the power sector of India in the last few years. During 2006-07, the growth rate was only 3.1 %. But in the year 2007-08 (up to September 07) the growth rate was 7.6%. The Government of India has a vision of providing power to all by 2012. For this it is very much essential that the installed power generation capacity should reach to 2, 00,000 MW from the present capacity of 1, 14,000 MW. As per leading market research firm RNCOS (2008) report on “Indian Power Sector Analysis” more than 64% of India’s total installed capacity is contributed by thermal power. Western region accounts for largest share (30.09%) of the installed power in India followed by Southern region with 27.76%. Unbalanced growth remains the cause of concern for the Indian power sector. Only about 56% of households have access to electricity, with the rural access being 44% and urban access about 82%. Southern region remains the dominant region in renewable energy source accounting for more than 57% of the total renewable energy installed capacity.

GROWTH PROSPECTS
India possesses a vast opportunity to grow in the field of power generation, transmission, and distribution. The target of over 150,000 MW of hydel power germination is yet to be achieved. By the year 2012, India requires an additional 100,000 MW of generation capacity. A huge capital investment is required to meet this target. This has welcomed numerous power generation, transmission, and distribution companies across the globe to establish their operations in the country under the famous PPP (public-private partnership)programmes. The power sector is still experiencing a large demand-supply gap. This has called for an effective consideration of some of strategic initiatives.

34

35

5.1

TIMESE MESERIES REGRESSION ANALYSIS

TABLE 5.1.1 APOLLO TY LO TYRES LTD. :
Years 2006-07 2007-08 2008-09 2009-10 2010-11 P1 280.05 41.25 17.75 17.75 69.55 P0 296 275 41.5 18.3 72.45 Return on Debt-Equity Shares=Ln(P1/P0) Ratio -0.0554 -1.8971 -0.8493 -0.0305 -0.0409 0.64 0.38 0.51 0.66 1.01 Dividend Payout Ratio 0.2099 0.1344 0.2454 0.1062 0.1477 Retention Ratio=(1-DPR) 0.7901 0.8656 0.7546 0.8938 0.8523

Graph 5.1.1
2.5000 2.0000 1.5000 1.0000 0.5000 0.0000 -0.5000 -1.0000 -1.5000 -2.0000 -2.5000

Retention Ratio=(1-DPR) Dividend Payout Ratio Debt-Equity Ratio Return on Shares=Ln(P1/P0)

TIME SERIES REGRESSION RES ESULT:

REGRESSION ANALYSIS Model R 1 .777 R Square Adju djusted R Square Std. Error of the Estimate .604 .209 09 .7273938

a. Predictors: (Constant), DIVIDE PAYOUT , DEBT EQUITY IDENT b. Dependent Variable: RETURN O EQUITY N ON

36

ANOVA Model 1 Regression Residual Total Sum of Squares 1.617 1.058 2.675 df 2 2 4 Mean Square .808 .529 F 1.528 Sig. .396a

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -2.696 2.748 2.148 Std. Error 1.649 1.572 6.468 .791 .150 Standardized Coefficients Beta t -1.635 1.748 .332 Sig. .244 .223 .771

37

Analysis:
The "R Square 0.604" indicates that 60.4% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 1.528 with p-value of 0.396. The coefficient of debt equity ratio has estimated standard error of 1.572, t-statistic of 1.748 and p-value of 0.223 The coefficient of dividend payout ratio has estimated standard error of 6.468, tstatistic of 0.332 and p-value of 0.771. A simple summary of above output is the fitted line is y = 2.748 – 2.148x1 -2.696x2

Inference :
The "R Square of 0.604" indicates that the explanatory power of this regression is medium. The coefficient of debt equity ratio has p-value of 0.223>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.771> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.396) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.
38

5.1.2 ASHOK LEYLAND LIMITED.
Years 2006-07 2007-08 2008-09 2009-10 2010-11 P1 38.65 35.2 18.05 55.85 56.85 P0 40.8 36.35 35 18.55 57 Return on Debt-Equity Shares=Ln(P1/P0) Ratio -0.0541 -0.0321 -0.6622 1.1022 -0.0026 0.34 0.42 0.93 0.98 1 Dividend Payout Ratio 0.5131 0.498 0.8191 0.5492 0.4898 Retention Ratio=(1-DPR) 0.4869 0.502 0.1809 0.4508 0.5102

5.1.2.A GRAPH
1.2000 1.0000 0.8000 0.6000 0.4000 0.2000 0.0000 -0.2000 2003-04 2004-05 2005-06 2006-07 2007-08 -0.4000 -0.6000 -0.8000 Debt-Equity Ratio Return on Shares=Ln(P1/P0) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .453 -.095 .6684182

Model R 1 .673

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY

39

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .453 -.095 .6684182

Model R 1 .673

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY ANOVA Model 1 Regression Residual Total Sum of Squares df Mean Square .739 .894 1.633 2 2 4 .370 .447 F Sig.

.827 .547a

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B 1.221 .911 -3.171 Std. Error 1.435 1.107 2.591 .464 -.690 Standardized Coefficients Beta T .851 .853 -1.224 Sig. .484 .497 .346

40

Analysis:

The "R Square 0.453" indicates that 45.3% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 0.827 with p-value of 0.547. The coefficient of debt equity ratio has estimated standard error of 0.911, t-statistic of 0.823 and p-value of 0.497 The coefficient of dividend payout ratio has estimated standard error of 2.591, tstatistic of -1.224 and p-value of 0.346. A simple summary of above output is the fitted line is y = 1.221 – 0.911x1–3.171x2

Inference :
The "R Square of 0.453" indicates that the explanatory power of this regression is weak. The coefficient of debt equity ratio has p-value of 0.497>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.346> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.484) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

41

5.1.3 MRF TYRES LTD
Years P1 P0 Return on Debt-Equity Shares=Ln(P1/P0) Ratio 0.0397 0.1854 -0.7951 1.3191 -0.0919 0.66 0.62 0.86 0.22 0.56 Dividend Payout Ratio 0.121 0.0577 0.0698 0.0483 0.0698 Retention Ratio=(1DPR) 0.879 0.9423 0.9302 0.9517 0.9302

2006-07 2007-08 2008-09 2009-10 2010-11

3340 3965 1784 6770.15 6271.1

3210 3294 3951 1810.1 6875

5.1.2.A GRAPH
1.2000 1.0000 0.8000 0.6000 0.4000 0.2000 0.0000 -0.2000 2003-04 2004-05 2005-06 2006-07 2007-08 -0.4000 -0.6000 -0.8000 Debt-Equity Ratio Return on Shares=Ln(P1/P0) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .941 .855 .2591620
42

Model R 1 .971

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY ANOVA Model 1 Regression Residual Total Sum of Squares df Mean Square 2.739 .134 2.330 2 2 4 1.098 .067 F Sig.

16.347 .0547a

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B 1.905 -3.280 1.931 Std. Error .409 .617 5.102 -.999 -.071 Standardized Coefficients Beta T 4.660 -5.311 .378 Sig. .043 .034 .742

43

Analysis:

The "R Square 0.971" indicates that 97.1% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 16.347with p-value of 0.058. The coefficient of debt equity ratio has estimated standard error of .617, t-statistic of 5.311 and p-value of 0.034 The coefficient of dividend payout ratio has estimated standard error of 5.102, tstatistic of 0.378 and p-value of 0.742. A simple summary of above output is the fitted line is y = 1.905 – 3.280x1 + 1.931x2

Inference :
The "R Square of 0.942" indicates that the explanatory power of this regression is great. The coefficient of debt equity ratio has p-value of 0.034<0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio affect the value of the firm. The coefficient of dividend payout ratio has p-value of 0.742> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.043) < 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence,

Reject H0: Dividend Policies does not affect the value of the firm. Accept H1: Dividend Policies does affect the value of the firm.

44

5.1.3 TATA MOTORS
Years 2006-07 2007-08 2008-09 2009-10 2010-11 P1 725.5 620.7 180.6 755.5 1248.35 P0 969 663.2 627.5 178.95 779.7 Return on Debt-Equity Shares=Ln(P1/P0) Ratio -0.2894 -0.0662 -1.2455 1.4403 0.4707 0.59 0.8 1.06 1.11 0.79 Dividend Payout Ratio 0.3534 0.3251 0.3452 0.4428 0.8096 Retention Ratio=(1-DPR) 0.6466 0.6749 0.6548 0.5572 0.1904

5.1.2.A GRAPH
1.2000 1.0000 0.8000 0.6000 0.4000 0.2000 0.0000 -0.2000 2003-04 2004-05 2005-06 2006-07 2007-08 -0.4000 -0.6000 -0.8000 Debt-Equity Ratio Return on Shares=Ln(P1/P0) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .211 -.579 1.2431890

Model R 1 .459

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY

45

ANOVA Model 1 Regression Residual Total Sum of Squares df Mean Square .825 3.091 3.916 2 2 4 .413 1.546 F Sig.

.267 .789a

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -1.760 1.020 2.052 Std. Error 3.046 2.913 3.070 -.221 -.421 Standardized Coefficients Beta T -.578 .350 .669 Sig. .622 .760 .573

46

Analysis:

The "R Square 0.459" indicates that 45.90% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 0.267 with p-value of 0.789. The coefficient of debt equity ratio has estimated standard error of 1.020, t-statistic of 0.350 and p-value of 0.760 The coefficient of dividend payout ratio has estimated standard error of 3.070, tstatistic of 0.669 and p-value of 0.573. A simple summary of above output is the fitted line is y = -1.760 – 1.020x1 + 2.052x2

Inference :
The "R Square of 0.211" indicates that the explanatory power of this regression is weak. The coefficient of debt equity ratio has p-value of 0.760>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.573> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.1529) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence,

Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

47

5.1.4 CUMMIN SIND
Years 2006-07 2007-08 2008-09 2009-10 2010-11 P1 265 185 510.5 697.9 P0 251 317 181.5 509.15 Return on Debt-Equity Shares=Ln(P1/P0) Ratio 0.0543 0.2084 -0.5385 1.0341 0.3153 0.01 0.03 0.02 0.01 0.01 Dividend Payout Ratio 0.3779 0.3796 0.4846 0.6252 0.5849 Retention Ratio=(1-DPR) 0.6221 0.6204 0.5154 0.3748 0.4151

314.95 255.7

GRAPH:
2.0000 1.5000 1.0000 0.5000 Debt-Equity Ratio 0.0000 1 -0.5000 -1.0000 2 3 4 5 Return on Shares=Ln(P1/P0) Retention Ratio=(1DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .315 -.369 .6604931

Model R 1 .562

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
48

ANOVA Model 1 Regression Residual Total Sum of Squares df Mean Square .402 .873 1.275 2 .201 2 .436 4 F Sig.

.461 .685a

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -.894 -6.377 2.469 Std. Error 2.208 44.472 3.486 -.101 .499 Standardized Coefficients Beta T -.405 -.143 .708 Sig. .725 .899 .552

49

Analysis:
The "R Square 0." indicates that 84.71% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 5.5414 with p-value of 0.1529. The coefficient of debt equity ratio has estimated standard error of 4.5455, t-statistic of -0.2105 and p-value of 0.8528 The coefficient of dividend payout ratio has estimated standard error of 10.1536, tstatistic of 1.6107 and p-value of 0.2486. A simple summary of above output is the fitted line is y = -3.6879 – 0.9568x1 + 16.3541x2

Inference :
The "R Square of 0.8471" indicates that the explanatory power of this regression is great. The coefficient of debt equity ratio has p-value of 0.8528>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.2486> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.1529) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.
50

6.1. ABAN OFFSHORE
Years 2006-07 2007-08 2008-09 2009-10 2010-11 P1 2011 3041 402 1169.3 616.25 P0 1220 1940 3035 396 1197.4 Return on Debt-Equity Shares=Ln(P1/P0) Ratio 0.4998 0.4495 -2.0215 1.0827 -0.6643
2.92 3.76 2.49 3.7

Dividend Payout Retention Ratio Ratio=(1-DPR) 0.1648 0.1775 0.1529 0.0884 0.0913 0.8352 0.8225 0.8471 0.9116 0.9087

1.88

GRAPH:
2.0000 1.5000 1.0000 0.5000 Debt-Equity Ratio 0.0000 1 -0.5000 -1.0000 2 3 4 5 Return on Shares=Ln(P1/P0) Retention Ratio=(1DPR) Dividend Payout Ratio

.

TIME SERIES REGRESSION RESULT:

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .605 .210 1.0943055

Model R 1 .778

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY

51

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .605 .210 1.0943055

Model R 1 .778

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY ANOVA Model 1 Regression Residual Total Sum of Squares df Mean Square 3.671 2.395 6.066 2 2 4 1.836 1.198 F Sig.

1.533 .395a

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -2.437 1.228 -9.751 Std. Error 2.418 .709 13.509 .800 -.334 Standardized Coefficients Beta T -1.008 1.732 -.722 Sig. .420 .225 .545

52

Analysis:

The "R Square 0.778" indicates that 77.8% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 1.533 with p-value of 0.395. The coefficient of debt equity ratio has estimated standard error of 0.709, t-statistic of 1.732 and p-value of 0.225 The coefficient of dividend payout ratio has estimated standard error of 13.509, tstatistic of -.722 and p-value of 0.545. A simple summary of above output is the fitted line is y = -2.437 – 0.1.228x1 + 9.751x2

Inference :
The "R Square of 0.605" indicates that the explanatory power of this regression is great. The coefficient of debt equity ratio has p-value of 0.225>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.545> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.420) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence,

Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.
53

6.1.2 GAIL LIMITED.
Years 2006-07 2007-08 2008-09 2009-10 2010-11 P1 264.95 426.95 243 409.15 464 P0 317.55 264 423.95 251.1 410.25 Return on Debt-Equity Shares=Ln(P1/P0) Ratio -0.1811 0.4807 -0.5566 0.4882 0.1231 0.12 0.1 0.08 0.09 0.12 Dividend Payout Retention Ratio Ratio=(1-DPR) 0.4061 0.3803 0.3705 0.3536 0.3107 0.5939 0.6197 0.6295 0.6464 0.6893

GRAPH:
2.0000

1.5000

Retention Ratio=(1DPR) Dividend Payout Ratio Debt-Equity Ratio

1.0000

0.5000 Return on Shares=Ln(P1/P0) 2006-072007-082008-09 2009-10 2010-11 -0.5000

0.0000

TIME SERIES REGRESSION RESULT:

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .070 -.861 1.0943055

Model R 1 .264

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY

54

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .070 -.861 1.0943055

Model R 1 .264

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY ANOVA Model 1 Regression Residual Total Sum of Squares df Mean Square 3.671 2.395 6.066 2 2 4 1.836 1.198 F Sig.

1.533 .395a

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -2.437 1.228 -9.751 Std. Error 2.418 .709 13.509 .800 -.334 Standardized Coefficients Beta T -1.008 1.732 -.722 Sig. .420 .225 .545

55

Analysis:

The "R Square 0.070" indicates that 7.00% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 0.075 with p-value of 0.930. The coefficient of debt equity ratio has estimated standard error of 2.858, t-statistic of 0.167 and p-value of 0.883 The coefficient of dividend payout ratio has estimated standard error of -2.865, tstatistic of -0.331 and p-value of 0.772. A simple summary of above output is the fitted line is y = 0.823 +2.858x1 -2.865x2

Inference :
The "R Square of 0.070" indicates that the explanatory power of this regression is very weak. The coefficient of debt equity ratio has p-value of 0.883>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.772> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.847) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence,

Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.
56

6.1.3 HINDUSTAN PETROLIUM:
Years 2006-07 2007-08 2008-09 2009-10 2010-11 P1 255 238.6 235.4 230 230.45 P0 286.2 228.5 236.05 238.05 287.1 Return on Debt-Equity Shares=Ln(P1/P0) Ratio -0.1154 0.0433 -0.0028 -0.0344 -0.2198 1.1 1.59 2.12 1.84 1.99 Dividend Payout Retention Ratio Ratio=(1-DPR) 0.4509 0.1047 0.3617 0.3641 0.358 0.5491 0.8953 0.6383 0.6359 0.642

GRAPH:
2.0000

1.5000

Retention Ratio=(1DPR) Dividend Payout Ratio Debt-Equity Ratio

1.0000

0.5000 Return on Shares=Ln(P1/P0) 2006-072007-082008-09 2009-10 2010-11 -0.5000

0.0000

TIME SERIES REGRESSION RESULT:

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .346 -.308 .1186477

Model R 1 .588

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY

57

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .346 -.308 .1186477

Model R 1 .588

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY ANOVA Model 1 Regression Residual Total Sum of Squares df Mean Square .015 .028 .043 2 2 4 .007 .014 F Sig.

.528 .654

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B .104 -.009 -.469 Std. Error .314 .148 .456 -.036 -.591 Standardized Coefficients Beta T .331 -.063 -1.027 Sig. ..772 .956 .412

58

Analysis:

The "R Square 0.588" indicates that 58.80% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 0.528 with p-value of 0.654. The coefficient of debt equity ratio has estimated standard error of 0.148, t-statistic of -0.063 and p-value of 0.412 The coefficient of dividend payout ratio has estimated standard error of 0.458, tstatistic of -1.027 and p-value of 0.412 A simple summary of above output is the fitted line is y = 0.104 – 0.009x1 -0.469x2

Inference :
The "R Square of 0.346" indicates that the explanatory power of this regression is very weak. The coefficient of debt equity ratio has p-value of 0.956>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.412> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.772) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence,

Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

59

6.1.4 INDIAN OIL CORPORATION:
Years 2006-07 2007-08 2008-09 2009-10 2010-11 P1 400 447.1 386.1 296 332.85 P0 609.75 386.5 452 392 299.1 Return on Debt-Equity Shares=Ln(P1/P0) Ratio -0.4216 0.1457 -0.1576 -0.2809 0.1069 0.78 0.86 1.02 0.88 0.95 Dividend Payout Retention Ratio Ratio=(1-DPR) 0.3483 0.1051 0.3611 0.3586 0.3579 0.6517 0.8949 0.6389 0.6414 0.6421

GRAPH:
2.0000

1.5000

Retention Ratio=(1DPR) Dividend Payout Ratio Debt-Equity Ratio

1.0000

0.5000 Return on Shares=Ln(P1/P0) 2006-072007-082008-09 2009-10 2010-11 -0.5000

0.0000

TIME SERIES REGRESSION RESULT:

REGRESSION ANALYSIS R Adjusted Square Square .681 -.362 R Std. Error of the Estimate .1957329

Model R 1 .825

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
60

ANOVA Model 1 Regression Residual Total Sum of Squares df Mean Square .164 .077 .240 2 2 4 .082 .038 F Sig.

2.137 .319

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -1.072 1.616 -1.616 Std. Error .967 1.115 .903 .601 -.751 Standardized Coefficients Beta T -1.108 1.450 -1.811 Sig. .383 .284 .212

61

Analysis:

The "R Square 0.681" indicates that 68.1% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 2.137 with p-value of 0.319. The coefficient of debt equity ratio has estimated standard error of 1.115, t-statistic of 1.450 and p-value of 0.284 The coefficient of dividend payout ratio has estimated standard error of 0.903, tstatistic of -1.811 and p-value of 0.212. A simple summary of above output is the fitted line is y = -1.072 –+1.616x1 -1.636x2

Inference :
The "R Square of 0.681" indicates that the explanatory power of this regression is great. The coefficient of debt equity ratio has p-value of 0.284>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.212> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.383) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence,

Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

62

6.1.5 OIL AND NATURAL GAS CORPORATION:
Years 2006-07 2007-08 2008-09 2009-10 2010-11 P1 880 986 778.2 1092.55 291.3 P0 1316 819 1015 805.5 1083 Return on Debt-Equity Shares=Ln(P1/P0) Ratio -0.4024 0.1856 -0.2657 0.3048 -1.3131 0.24 0.18 0.2 0.19 0.18 Dividend Payout Retention Ratio Ratio=(1-DPR) 0.4885 0.4794 0.4965 0.4902 0.4598 0.5115 0.5206 0.5035 0.5098 0.5402

GRAPH
2.0000

1.5000 Retention Ratio=(1DPR) 1.0000 Dividend Payout Ratio Debt-Equity Ratio 0.5000 Return on Shares=Ln(P1/P0) 0.0000 2006-072007-082008-09 2009-10 2010-11 -0.5000

TIME SERIES REGRESSION RESULT:

REGRESSION ANALYSIS R Adjusted Square Square .652 .304 R Std. Error of the Estimate .5342925

Model R 1 .807

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY

63

REGRESSION ANALYSIS R Adjusted Square Square .652 .304 R Std. Error of the Estimate .5342925

Model R 1 .807

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY ANOVA Model 1 Regression Residual Total Sum of Squares df Mean Square 1.069 .571 1.640 2 2 4 .534 .285 F 1.872 Sig.
.348a

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -18.010 -11.191 41.267 Std. Error 9.384 12.231 21.329 -.435 .920 Standardized Coefficients Beta T -1.919 -.915 1.935 Sig. .195 .457 .193

64

Analysis:

The "R Square 0.652" indicates that 65.2% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 1.872with p-value of 0.348. The coefficient of debt equity ratio has estimated standard error of 12.231, t-statistic of -0.915 and p-value of 0.457 The coefficient of dividend payout ratio has estimated standard error of 21.329, tstatistic of 1.935 and p-value of 0.193. A simple summary of above output is the fitted line is y = -18.010 – 11.191x1 + 41.267x2

Inference :
The "R Square of 0.652" indicates that the explanatory power of this regression is medium. The coefficient of debt equity ratio has p-value of 0.457>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.193> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.195) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence,

Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.
65

7.1.1 AUROBINO
Years P1 P0 Return on Debt-Equity Shares=Ln(P1/P0) Ratio -0.0080 -0.8496 -0.4579 1.6342 -1.5859 2.13 1.44 1.6 1.02 0.9 Dividend Payout Ratio 0.0681 0.0706 0.2202 0.0616 0.1151 Retention Ratio=(1DPR) 0.9319 0.9294 0.7798 0.9384 0.8849

2006-07 2007-08 2008-09 2009-10 2010-11

682 291.6 188.2 961.05 195.95

687.5 682 297.5 187.5 956.95

GRAPH:
2.0000

1.5000

Retention Ratio=(1DPR) Dividend Payout Ratio Debt-Equity Ratio

1.0000

0.5000 Return on Shares=Ln(P1/P0) 2006-072007-082008-09 2009-10 2010-11 -0.5000

0.0000

TIME SERIES REGRESSION RESULT:

REGRESSION ANALYSIS R Adjusted Square Square .114 -.772 R Std. Error of the Estimate 1.6025030

Model R 1 .337

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY

66

REGRESSION ANALYSIS R Adjusted Square Square .114 -.772 R Std. Error of the Estimate 1.6025030

Model R 1 .337

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY ANOVA Model 1 Regression Residual Total Sum of Squares df Mean Square .660 5.136 5.796 2 2 4 .330 2.568 F Sig.

0.129 .886

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B .252 .103 -6.080 Std. Error 2.693 1.631 12.031 .042 -.337 Standardized Coefficients Beta T .093 .063 -.505 Sig. .934 .955 .663

67

Analysis:

The "R Square 0.114" indicates that 11.4% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 0.129 with p-value of 0.886. The coefficient of debt equity ratio has estimated standard error of 1.631, t-statistic of 0.063 and p-value of 0.663 The coefficient of dividend payout ratio has estimated standard error of 12.031, tstatistic of -0.505 and p-value of 0.633. A simple summary of above output is the fitted line is y = 0.252+0.103x1 +-6.080x2

Inference :
The "R Square of 0.114" indicates that the explanatory power of this regression is very weak. The coefficient of debt equity ratio has p-value of 0.955>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.663> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.934) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence,

Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.
68

7.1.2 DR.REDDIS LABORATORIES LTD.
Years 2006-07 2007-08 2008-09 2009-10 2010-11 P1 725 590 490 1281 1639.05 P0 1449.8 712 598 484.35 1260 Return on Debt-Equity Shares=Ln(P1/P0) Ratio -0.6930 -0.1880 -0.1992 0.9726 0.2630 0.08 0.1 0.12 0.1 0.24 Dividend Payout Ratio 0.0625 0.1552 0.2194 0.2619 0.342 Retention Ratio=(1-DPR) 0.9375 0.8448 0.7806 0.7381 0.658

GRAPH;
2.0000

1.5000

Retention Ratio=(1DPR) Dividend Payout Ratio Debt-Equity Ratio

1.0000

0.5000 Return on Shares=Ln(P1/P0) 2006-072007-082008-09 2009-10 2010-11 -0.5000

0.0000

TIME SERIES REGRESSION RESULT:

REGRESSION ANALYSIS R Adjusted Square Square .855 .710 R Std. Error of the Estimate .3371708

Model R 1 .925

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
69

ANOVA Model 1 Regression Residual Total Sum of Squares df 1.338 .227 1.566 2 2 4 Mean Square .669 .114 F 5.886 Sig.
.145a

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -.635 -9.090 8.786 Std. Error .382 4.412 2.672 -.933 1.489 Standardized Coefficients Beta T -1.659 -2.060 3.228 Sig. .239 .176 .081

70

Analysis:

The "R Square 0.855" indicates that 85.50% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 5.886 with p-value of 0.145. The coefficient of debt equity ratio has estimated standard error of 4.412, t-statistic of -2.0605 and p-value of 0.176 The coefficient of dividend payout ratio has estimated standard error of 2.672, tstatistic of 3.288 and p-value of 0.081. A simple summary of above output is the fitted line is y = -0.635 – 9.090x1 + 8.786x2

Inference :
The "R Square of 0.8471" indicates that the explanatory power of this regression is good. The coefficient of debt equity ratio has p-value of 0.176>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.081> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.239) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence,

Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.
71

7.1.3 GLAXOSMITHKLINE PHARMASEUTICALS LTD.
Years 2006-07 2007-08 2008-09 2009-10 2010-11 P1 1121.25 1040.15 1089.9 1784 2062.95 P0 1528 1100.05 1050.05 1090 1773.9 Return on Debt-Equity Shares=Ln(P1/P0) Ratio -0.3095 -0.0560 0.0372 0.4927 0.1510 0.08 0.1 0.12 0.1 0.24 Dividend Payout Ratio 0.5488 0.6635 0.6875 0.5743 0.6954 Retention Ratio=(1-DPR) 0.4512 0.3365 0.3125 0.4257 0.3046

GRAPH:
2.0000

1.5000

Retention Ratio=(1DPR) Dividend Payout Ratio Debt-Equity Ratio

1.0000

0.5000 Return on Shares=Ln(P1/P0) 2006-072007-082008-09 2009-10 2010-11 -0.5000

0.0000

TIME SERIES REGRESSION RESULT:

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .077 -.845 .3995086

Model R 1 .278

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
72

ANOVA Model 1 Regression Residual Total Sum of Squares df Mean Square 0.027 .319 .346 2 2 4 .013 .160 F Sig.

.084 .923a

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B .263 1.610 -.640 Std. Error 2.175 4.119 3.906 .351 -.147 Standardized Coefficients Beta T .121 .391 -.164 Sig. .915 .734 .885

73

Analysis:

The "R Square 0.077" indicates that 7.7% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 0.084 with p-value of 0.923. The coefficient of debt equity ratio has estimated standard error of 4.119, t-statistic of 0.391 and p-value of 0.734 The coefficient of dividend payout ratio has estimated standard error of 3.906, tstatistic of -0.164 and p-value of 0.885. A simple summary of above output is the fitted line is y = 0.263 +1.610x1 -0.640x2

Inference :
The "R Square of 0.077" indicates that the explanatory power of this regression is very weak. The coefficient of debt equity ratio has p-value of 0.734>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.885> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.915) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence,

Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.
74

7.1.4 IND-SWIFT LABORATORIES LTD.
Years 2006-07 2007-08 2008-09 2009-10 2010-11 P1 56.35 45 23.4 66.5 96.85 P0 117.35 55.6 44.6 24 68.6 Return on Debt-Equity Shares=Ln(P1/P0) Ratio -0.7336 -0.2115 -0.6450 1.0191 0.3449 1.19 1.38 1.33 1.41 1.64 Dividend Payout Ratio 0.109 0.1379 0.0906 0.0763 0.0562 Retention Ratio=(1-DPR) 0.891 0.8621 0.9094 0.9237 0.9438

GRAPH:
1.6000 1.4000 1.2000 1.0000 0.8000 0.6000 Debt-Equity Ratio 0.4000 0.2000 0.0000 -0.2000 2006-072007-082008-09 2009-10 2010-11 -0.4000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .413 -.173 .7935000

Model R 1 .643

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY

75

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .413 -.173 .7935000

Model R 1 .643

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY ANOVA Model 1 Regression Residual Total Sum of Squares df Mean Square .887 1.259 2.146 2 2 4 .443 .630 F Sig.

.704 .587a

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -2.373 2.061 -5.709 Std. Error 5.525 3.160 16.506 .459 -.244 Standardized Coefficients Beta T -.430 .652 -.346 Sig. .709 .581 .762

76

Analysis:

The "R Square 0.413" indicates that 41.3% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is .704 with p-value of 0.587. The coefficient of debt equity ratio has estimated standard error of 3.160, t-statistic of -0.652 and p-value of 0.581 The coefficient of dividend payout ratio has estimated standard error of 16.506, tstatistic of -0.346 and p-value of 0.762. A simple summary of above output is the fitted line is y = -2.373 +2.061x1 -5.709x2

Inference :
The "R Square of 0.413" indicates that the explanatory power of this regression is weak. The coefficient of debt equity ratio has p-value of 0.581>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.762> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.709) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence,

Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.
77

7.1.5 AJANTA PHARMAS
Years 2006-07 2007-08 2008-09 2009-10 2010-11 P1 71.7 82.5 51.5 182 200.3 P0 77.5 71.25 80.5 51.9 182.4 Return on Shares=Ln(P1/P0) -0.0778 0.1466 -0.4467 1.2547 0.0936 Debt-Equity Ratio 0.9 1.23 1.58 1.16 0.73 Dividend Payout Ratio 0.1998 0.1924 0.1601 0.1674 0.1464 Retention Ratio=(1-DPR) 0.8002 0.8076 0.8399 0.8326 0.8536

GRAPH:
1.6000 1.4000 1.2000 1.0000 0.8000 0.6000 Debt-Equity Ratio 0.4000 0.2000 0.0000 -0.2000 2006-072007-082008-09 2009-10 2010-11 -0.4000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .039 -.921 .8826442

Model R 1 .198

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY

78

ANOVA Model 1 Regression Residual Total Sum of Squares df Mean Square .064 1.558 1.622 2 2 4 .032 .779 F Sig.

.041 .961a

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B .873 -.371 -1.520 Std. Error 3.739 1.535 19.740 -.190 -.053 Standardized Coefficients Beta T .233 -.274 -.077 Sig. .837 .810 .946

79

Analysis:

The "R Square 0.039" indicates that 3.9% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 0.041 with p-value of 0.961. The coefficient of debt equity ratio has estimated standard error of 1.353, t-statistic of -0.274 and p-value of 0.810 The coefficient of dividend payout ratio has estimated standard error of 19.740, tstatistic of -0.077 and p-value of 0.946. A simple summary of above output is the fitted line is y = -0.873 – 0.371x1 -1.520x2

Inference :
The "R Square of 0.039" indicates that the explanatory power of this regression is very weak. The coefficient of debt equity ratio has p-value of 0.810>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.946> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.837) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence,

Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.
80

8.1.1 :BRITANIA:
Years 2006-07 2007-08 2008-09 2009-10 2010-11 P1 58.85 113 74.45 293 250.8 P0 70.55 57.55 116 76.5 301 Return on Debt-Equity Shares=Ln(P1/P0) Ratio -0.1813 0.6747 -0.4435 1.3429 -0.1825 0.6 0.88 1.01 0.81 0.64 Dividend Payout Ratio 0.3001 0.314 0.271 0.1975 0.2833 Retention Ratio=(1-DPR) 0.6999 0.686 0.729 0.8025 0.7167

GRAPH:
1.6000 1.4000 1.2000 1.0000 0.8000 0.6000 Debt-Equity Ratio 0.4000 0.2000 0.0000 -0.2000 2006-072007-082008-09 2009-10 2010-11 -0.4000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .149 -.702 .8770790

Model R 1 .386

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY

81

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .149 -.702 .8770790

Model R 1 .386

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY ANOVA Model 1 Regression Residual Total Sum of Squares df Mean Square .269 1.539 1.808 2 2 4 .135 .769 F Sig.

.175 .851a

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B .120 -.373 -.553 Std. Error 1.470 1.002 3.249 -.294 -.134 Standardized Coefficients Beta T .082 -.372 -.170 Sig. .942 .746 .880

82

Analysis:

The "R Square 0.149" indicates that 14.9% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 0.175 with p-value of 0.851. The coefficient of debt equity ratio has estimated standard error of 1.002, t-statistic of -0.372 and p-value of 0.746 The coefficient of dividend payout ratio has estimated standard error of 3.249, tstatistic of -0.170 and p-value of 0.880. A simple summary of above output is the fitted line is y = 0.120 – 0.373x1 -0.553x2

Inference :
The "R Square of 0.149" indicates that the explanatory power of this regression is very weak. The coefficient of debt equity ratio has p-value of 0.746>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.880> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.942) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence,

Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.
83

8.1.2 COLGATE:
Years P1 P0 Return on Debt-Equity Shares=Ln(P1/P0) Ratio -0.2727 0.1383 0.1900 0.3819 0.1954 0.02 0.03 0.02 0.01 0.01 Dividend Payout Ratio 0.9247 0.9824 0.8205 0.7508 0.8665 Retention Ratio=(1-DPR) 0.0753 0.0176 0.1795 0.2492 0.1335

2006-07 2007-08 2008-09 2009-10 2010-11

332.4 382.35 470.75 675.25 823.45

436.6 332.95 389.3 460.9 677.3

GRAPH:
1.6000 1.4000 1.2000 1.0000 0.8000 0.6000 Debt-Equity Ratio 0.4000 0.2000 0.0000 -0.2000 2006-072007-082008-09 2009-10 2010-11 -0.4000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .417 -.165 .2608237

Model R 1 .646

84

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY ANOVA Model 1 Regression Residual Total Sum of Squares df Mean Square .097 .136 .234 2 .049 2 .068 4 F Sig.

.716 .583a

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B 1.921 7.385 -2.218 Std. Error 1.689 24.833 2.312 .256 -.825 Standardized Coefficients Beta T 1.137 .297 -.959 Sig. .373 .794 .439

85

Analysis:

The "R Square 0.417" indicates that 41.7% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 0.716 with p-value of 0.583. The coefficient of debt equity ratio has estimated standard error of 24.833, t-statistic of 0.297 and p-value of 0.794 The coefficient of dividend payout ratio has estimated standard error of 2.312, tstatistic of -0.959 and p-value of 0.439. A simple summary of above output is the fitted line is y = 1.921 +7.385x1 -2.218x2

Inference :
The "R Square of 0.417" indicates that the explanatory power of this regression is weak. The coefficient of debt equity ratio has p-value of 0.794>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.439> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.373) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence,

Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

86

8.1.3 DABAR LTD.
Years P1 P0 Return on DebtShares=Ln(P1/P0) Equity Ratio -0.2788 0.05 0.1662 -0.0516 0.4932 -0.4994 0.03 0.19 0.14 0.23 Dividend Payout Ratio 0.5524 0.4786 0.4741 0.4686 0.4942 Retention Ratio=(1-DPR) 0.4476 0.5214 0.5259 0.5314 0.5058

2006-07 2007-08 2008-09 2009-10 2010-11

95 111 100 158.85 96.1

125.55 94 105.3 97 158.35

GRAPH:
1.6000 1.4000 1.2000 1.0000 0.8000 0.6000 Debt-Equity Ratio 0.4000 0.2000 0.0000 -0.2000 2006-072007-082008-09 2009-10 2010-11 -0.4000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .678 .356 .3093548

Model R 1 .824

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY

87

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .678 .356 .3093548

Model R 1 .824

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY ANOVA Model 1 Regression Residual Total Sum of Squares df Mean Square .403 .191 595 2 2 4 .202 .096 F Sig.

2.108 .322a

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B 4.889 -2.827 -9.261 Std. Error 2.525 1.932 4.894 -.636 -.822 Standardized Coefficients Beta T 1.940 -1.463 -1.982 Sig. .192 .281 .199

88

Analysis:

The "R Square 0.678" indicates that 67.8% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 2.108 with p-value of 0.322. The coefficient of debt equity ratio has estimated standard error of 1.932, t-statistic of -1.463 and p-value of 0.281 The coefficient of dividend payout ratio has estimated standard error of 4.894, tstatistic of -1.892 and p-value of 0.199. A simple summary of above output is the fitted line is y = 4.899 – 2.827x1 –9.261x2

Inference :
The "R Square of 0.678" indicates that the explanatory power of this regression is great. The coefficient of debt equity ratio has p-value of 0.281>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.199> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.192) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

89

8.1.3 ITC LIMITED
Years P1 P0 Return on DebtShares=Ln(P1/P0) Equity Ratio -0.2780 0.02 0.3321 -0.1314 0.3649 -0.3712 0.02 0.01 0.01 0.01 Dividend Payout Ratio 0.5053 0.4945 0.5006 1.0963 0.8024 Retention Ratio=(1-DPR) 0.4947 0.5055 0.4994 -0.0963 0.1976

2006-07 2007-08 2008-09 2009-10 2010-11

151 204.2 185.1 263.6 182.1

199.4 146.5 211.1 183 263.95

GRAPH:
1.6000 1.4000 1.2000 1.0000 0.8000 0.6000 Debt-Equity Ratio 0.4000 0.2000 0.0000 -0.2000 2006-072007-082008-09 2009-10 2010-11 -0.4000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .257 -.486 .4197609

Model R 1 .507

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY

90

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .257 -.486 .4197609

Model R 1 .507

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY ANOVA Model 1 Regression Residual Total Sum of Squares df Mean Square .122 .352 .474 2 2 4 .061 .176 F Sig.

.346 .743a

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -1.006 31.495 .807 Std. Error 1.234 48.590 .996 .501 .626 Standardized Coefficients Beta T -.815 .648 .810 Sig. .501 .583 .503

91

Analysis:

The "R Square 0.257" indicates that 25.71% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 0.346 with p-value of 0.743. The coefficient of debt equity ratio has estimated standard error of 48.590, t-statistic of 0.648 and p-value of 0.583 The coefficient of dividend payout ratio has estimated standard error of 0.996, tstatistic of 0.501 and p-value of 0.503. A simple summary of above output is the fitted line is y = -1.006+31.495x1 + 0.807x2

Inference :
The "R Square of 0.257" indicates that the explanatory power of this regression is very weak. The coefficient of debt equity ratio has p-value of 0.583>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.503> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.501) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

92

8.1.4 GODREJ LTD.
Years P1 P0 Return on DebtShares=Ln(P1/P0) Equity Ratio -1.6497 1.02 -0.1426 0.0828 0.7050 0.3367 0.89 0.12 0.01 0.18 Dividend Payout Ratio 0.7982 0.7326 0.7458 0.5934 0.4519 Retention Ratio=(1-DPR) 0.2018 0.2674 0.2542 0.4066 0.5481

2006-07 2007-08 2008-09 2009-10 2010-11

146 124 134.7 258.05 365.5

760 143 124 127.5 261

GRAPH:
1.6000 1.4000 1.2000 1.0000 0.8000 0.6000 Debt-Equity Ratio 0.4000 0.2000 0.0000 -0.2000 2006-072007-082008-09 2009-10 2010-11 -0.4000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:

REGRESSION ANALYSIS R Adjusted Square Square .742 .483 R Std. Error of the Estimate .6500147

Model R 1 .862

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY

93

REGRESSION ANALYSIS R Adjusted Square Square .742 .483 R Std. Error of the Estimate .6500147

Model R 1 .862

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY ANOVA Model 1 Regression Residual Total Sum of Squares df Mean Square 2.425 .845 3.270 2 2 4 1.212 .423 F Sig.

2.870 .258

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B 1.497 -1.309 -1.579 Std. Error 1.778 .886 2.974 -.685 -.246 Standardized Coefficients Beta T .842 -1.478 -.531 Sig. .489 .278 .649

94

Analysis:

The "R Square 0.742" indicates that 74.20% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 2.870 with p-value of 0.258. The coefficient of debt equity ratio has estimated standard error of 0.886, t-statistic of -1.478 and p-value of 0.278 The coefficient of dividend payout ratio has estimated standard error of 2.974, tstatistic of -0.531 and p-value of 0.649. A simple summary of above output is the fitted line is y = 1.497 – 1.309x1 -1.579x2

Inference :
The "R Square of 0.742" indicates that the explanatory power of this regression is good. The coefficient of debt equity ratio has p-value of 0.278>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.649> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.489) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

95

9.1.1 MC RUSSEL.
Years P1 P0 Return on DebtShares=Ln(P1/P0) Equity Ratio -0.8466 0.74 0.1311 -0.0373 1.3818 -0.0281 0.85 0.69 0.35 0.22 Dividend Payout Ratio 0.267 0.2712 0.2884 0.2124 0.2738 Retention Ratio=(1-DPR) 0.733 0.7288 0.7116 0.7876 0.7262

2006-07 2007-08 2008-09 2009-10 2010-11

60.9 65.9 64.5 268.8 252.6

142 57.8 66.95 67.5 259.8

GRAPH:
1.6000 1.4000 1.2000 1.0000 0.8000 0.6000 Debt-Equity Ratio 0.4000 0.2000 0.0000 -0.2000 2006-072007-082008-09 2009-10 2010-11 -0.4000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:

REGRESSION ANALYSIS R Adjusted Square Square .635 .269 R Std. Error of the Estimate .6857206

Model R 1 .797

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY

96

REGRESSION ANALYSIS R Adjusted Square Square .635 .269 R Std. Error of the Estimate .6857206

Model R 1 .797

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY ANOVA Model 1 Regression Residual Total Sum of Squares df Mean Square 1.633 .940 2.573 2 2 4 .816 .470 F Sig.

1.736 .365

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B 5.540 -.492 -19.572 Std. Error 3.168 1.400 12.975 .-166 -.712 Standardized Coefficients Beta T 1.749 -.352 -1.508 Sig. .222 .759 .27

97

Analysis:

The "R Square 0.635" indicates that 63.5% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 1.736 with p-value of 0.365. The coefficient of debt equity ratio has estimated standard error of 1.400, t-statistic of -0.352 and p-value of 0.759 The coefficient of dividend payout ratio has estimated standard error of 12.975, tstatistic of -1.508 and p-value of 0.270 A simple summary of above output is the fitted line is y = 5.540 – 0.492x1 -19.572x2

Inference :
The "R Square of 0.635" indicates that the explanatory power of this regression is great. The coefficient of debt equity ratio has p-value of 0.759>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.270> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.222) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

98

9.1.2CROPTON GREAVES LTD.
Years P1 P0 Return on Debt-Equity Shares=Ln(P1/P0) Ratio -1.7184 0.3787 -0.7130 0.6966 -0.0022 0.41 0.1 0.04 0.02 0.01 Dividend Payout Ratio 0.2793 0.2185 0.2159 0.1528 0.2368 Retention Ratio=(1-DPR) 0.7207 0.7815 0.7841 0.8472 0.7632

2006-07 2007-08 2008-09 2009-10 2010-11

198 276 124.5 260.5 273.8

1104 189 254 129.8 274.4

GRAPH;
1.6000 1.4000 1.2000 1.0000 0.8000 0.6000 Debt-Equity Ratio 0.4000 0.2000 0.0000 -0.2000 2006-072007-082008-09 2009-10 2010-11 -0.4000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .772 .544 .6514733

Model R 1 .879

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY

99

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .772 .544 .6514733

Model R 1 .879

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY ANOVA Model 1 Regression Residual Total Sum of Squares df Mean Square 2.872 .849 3.721 2 2 4 1.436 .424 F Sig.

3.384 .228a

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B 2.380 -2.512 -10.697 Std. Error 2.101 2.844 10.470 -.438 -.506 Standardized Coefficients Beta T 1.133 -.833 -1.022 Sig. .375 .470 .414

100

Analysis:

The "R Square 0.772" indicates that 77.2% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 3.384 with p-value of 0.228. The coefficient of debt equity ratio has estimated standard error of 2.844, t-statistic of -0.883 and p-value of 0.470 The coefficient of dividend payout ratio has estimated standard error of 10.470, tstatistic of -1.022 and p-value of 0.414. A simple summary of above output is the fitted line is y = 2.380– 2.512x1 -10.697x2

Inference :
The "R Square of 0.772" indicates that the explanatory power of this regression is good. The coefficient of debt equity ratio has p-value of 0.470>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.414> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.375) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

101

9.1.3 NEYVELI CORPORATION LTD.
Years P1 P0 Return on Debt-Equity Shares=Ln(P1/P0) Ratio -0.4137 0.8165 -0.3336 0.5432 -0.3319 0.16 0.18 0.31 0.43 0.39 Dividend Payout Ratio 0.5447 0.4509 0.3563 0.4781 0.3141 Retention Ratio=(1-DPR) 0.4553 0.5491 0.6437 0.5219 0.6859

2006-07 2007-08 2008-09 2009-10 2010-11

50.25 118.9 83.6 145.3 104.05

76 52.55 116.7 84.4 145

GRAPH;
1.6000 1.4000 1.2000 1.0000 0.8000 0.6000 Debt-Equity Ratio 0.4000 0.2000 0.0000 -0.2000 2006-072007-082008-09 2009-10 2010-11 -0.4000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .102 -.797 .7754441

Model R 1 .319

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY

102

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .102 -.797 .7754441

Model R 1 .319

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY ANOVA Model 1 Regression Residual Total Sum of Squares df Mean Square .136 1.203 1.339 2 .068 2 .601 4 F Sig.

.113 .898a

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -1.203 .907 2.315 Std. Error 2.841 3.739 4.868 .190 .373 Standardized Coefficients Beta T -.424 .243 .475 Sig. .713 .831 .681

103

Analysis:

The "R Square 0.102" indicates that 10.2% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 0.113 with p-value of 0.898. The coefficient of debt equity ratio has estimated standard error of 3.739, t-statistic of 0.243 and p-value of 0.831 The coefficient of dividend payout ratio has estimated standard error of 4.868, tstatistic of 0.475 and p-value of 0.681. A simple summary of above output is the fitted line is y = -1.203+ 0.907x1 + 2.315x2

Inference :
The "R Square of 0.102" indicates that the explanatory power of this regression is very weak. The coefficient of debt equity ratio has p-value of 0.831>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.681> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.713) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

104

TATA POWER:
Years 2006-07 2007-08 2008-09 2009-10 2010-11 P1 509.45 1171.9 765.3 1372.6 1330.35 P0 584.3 496.1 1174.5 794.55 1355.25 Return on Debt-Equity Shares=Ln(P1/P0) Ratio -0.1371 0.8596 -0.4283 0.5467 -0.0185 0.61 0.39 0.61 0.57 0.62 Dividend Payout Ratio 0.316 0.3084 0.312 0.3408 0.3326 Retention Ratio=(1-DPR) 0.684 0.6916 0.688 0.6592 0.6674

GRAPH;
1.6000 1.4000 1.2000 1.0000 0.8000 0.6000 Debt-Equity Ratio 0.4000 0.2000 0.0000 -0.2000 2006-072007-082008-09 2009-10 2010-11 -0.4000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:

REGRESSION ANALYSIS R Adjusted Square Square .976 .952 R Std. Error of the Estimate .1150556

Model R 1 .998

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
105

ANOVA Model 1 Regression Residual Total Sum of Squares df Mean Square 1.079 .026 1.105 2 2 4 .539 .013 F Sig.

40.741 .024a

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -3.611 -5.887 21.967 Std. Error 1.347 .657 4.542 -1.086 .586 Standardized Coefficients Beta T -2.681 -8.960 4.8360 Sig. .116 .012 .040

106

Analysis:

The "R Square 0.976" indicates that 97.60% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 40.741 with p-value of 0.024. The coefficient of debt equity ratio has estimated standard error of 0.657, t-statistic of -8.960 and p-value of 0.012 The coefficient of dividend payout ratio has estimated standard error of 4.542, tstatistic of 4.836 and p-value of 0.040. A simple summary of above output is the fitted line is y = -3.11 – 5.887x1 + 21.967x2

Inference :
The "R Square of 0.976" indicates that the explanatory power of this regression is great. The coefficient of debt equity ratio has p-value of 0.012>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.040> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio affect the value of the firm From the ANOVA table the p-value (i.e.0.116) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

107

TORRENT POWER;
Years P1 P0 Return on Debt-Equity Shares=Ln(P1/P0) Ratio -0.1813 0.6747 -0.4435 1.3429 -0.1825 0.6 0.88 1.01 0.81 0.64 Dividend Payout Ratio 0.3001 0.314 0.271 0.1975 0.2833 Retention Ratio=(1-DPR) 0.6999 0.686 0.729 0.8025 0.7167

2006-07 2007-08 2008-09 2009-10 2010-11

58.85 113 74.45 293 250.8

70.55 57.55 116 76.5 301

GRAPH;
1.6000 1.4000 1.2000 1.0000 0.8000 0.6000 Debt-Equity Ratio 0.4000 0.2000 0.0000 -0.2000 2006-072007-082008-09 2009-10 2010-11 -0.4000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .348 -.304 .8523548

Model R 1 .590

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY

108

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .348 -.304 .8523548

Model R 1 .590

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY ANOVA Model 1 Regression Residual Total Sum of Squares df Mean Square .775 1.453 2.229 2 2 4 .388 .727 F Sig.

.534 .652a

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B 2.842 .055 -9.674 Std. Error 3.549 2.541 9.522 .013 -.588 Standardized Coefficients Beta T .801 .022 -1.016 Sig. .507 .985 .417

109

Analysis:
The "R Square 0.348" indicates that 34.8% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 0.534 with p-value of 0.652. The coefficient of debt equity ratio has estimated standard error of 2.541, t-statistic of 0.022 and p-value of 0.985 The coefficient of dividend payout ratio has estimated standard error of 9.522, tstatistic of -1.016 and p-value of 0.417. A simple summary of above output is the fitted line is y = 2.842 – 0.055x1 -9.674x2

Inference :
The "R Square of 0.348" indicates that the explanatory power of this regression is weak. The coefficient of debt equity ratio has p-value of 0.985>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.417> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.507) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

110

BHEL:
Years P1 P0 Return on Debt-Equity Shares=Ln(P1/P0) Ratio -0.0167 -0.0588 -0.2271 0.4767 -0.1581 0.01 0.01 0.01 0.01 0.01 Dividend Payout Ratio 0.2952 0.309 0.3102 0.3054 0.2867 Retention Ratio=(1-DPR) 0.7048 0.691 0.6898 0.6946 0.7133

2006-07 2007-08 2008-09 2009-10 2010-11

2256.1 2032 1510 2379 2062.65

2294 2155 1895 1477 2416

GRAPH;
1.6000 1.4000 1.2000 1.0000 0.8000 0.6000 Debt-Equity Ratio 0.4000 0.2000 0.0000 -0.2000 2006-072007-082008-09 2009-10 2010-11 -0.4000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .029 -.295 .3155349

Model R 1 .169

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY

111

REGRESSION ANALYSIS R Adjusted R Square Square Std. Error of the Estimate .029 -.295 .3155349

Model R 1 .169

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY ANOVA Model 1 Regression Residual Total Sum of Squares df Mean Square .009 .299 .307 2 2 4 .009 .100 F Sig.

.089 .786a

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: 4.660 15.666 B -1.401 Std. Error 4.722 .000 .169 .297 Standardized Coefficients Beta T -.297 Sig. .786 .000 .786

112

Analysis:

The "R Square 0.029" indicates that 2.9% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 0.089 with p-value of 0.786. The coefficient of debt equity ratio has estimated standard error of 4.722, t-statistic of and p-value of The coefficient of dividend payout ratio has estimated standard error of 15.666, tstatistic of 0.297 and p-value of 0.786. A simple summary of above output is the fitted line is y = -1.401 – 0x1 + 4.660x2

Inference :
The "R Square of 0.029" indicates that the explanatory power of this regression is very very weak. The coefficient of debt equity ratio has p-value of 0>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.786> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.786) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

113

Cross sectional analysis
AUTOMOBILE SECTOR FOR Year 2006-07
COMPANY P1 P0 Return on Debt-Equity Shares=Ln(P1/P0) Ratio -0.0554 -0.0541 0.0397 -0.2894 0.0543 0.64 0.34 0.66 0.59 0.01 Dividend Payout Ratio 0.2099 0.5131 0.121 0.3534 0.3779 Retention Ratio=(1DPR) 0.7901 0.4869 0.879 0.6466 0.6221

APPOLO ASHOK LEYLAND MRF TATA MOTORS CUMMIN SIND

280.05 38.65 3340 725.5 265

296 40.8 3210 969 251

GRAPH:
2.0000 1.5000 1.0000 0.5000 0.0000 Debt-Equity Ratio -0.5000 -1.0000 -1.5000 -2.0000 Return on Shares=Ln(P1/P0) Retention Ratio=(1DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:
REGRESSION ANALYSIS R Adjusted Square Square .555 .109 R Std. Error of the Estimate .1298013

Model R 1 .745

114

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY ANOVA Model 1 Regression Residual Total Sum of Squares .042 .034 .076 df Mean Square 2 .021 2 .017 4 F 1.246 Sig. .445

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B .366 -.447 -.719 Std. Error .281 .299 .542 -.899 -.779 Standardized Coefficients Beta T 1.303 -1.493 -1.328 Sig. .322 .274 .316

115

ANALYSIS:

The "R Square 0.555" indicates that 55.5% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the Ftest statistic is 1.246 with p-value of 0.445. The coefficient of debt equity ratio has estimated standard error of 0.299, t-statistic of -1.493 and p-value of 0.274 The coefficient of dividend payout ratio has estimated standard error of 0.542, t-statistic of 1.328 and p-value of 0.316. A simple summary of above output is the fitted line is y = 0.366 – 0.447x1 -0.719x2

Inference :
The "R Square of 0.555" indicates that the explanatory power of this regression is great. The coefficient of debt equity ratio has p-value of 0.274>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.316> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.322) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence,

Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

116

AUTOMOBILE SECTOR FOR Year 2007-08
COMPANY P1 P0 Return on Debt-Equity Shares=Ln(P1/P0) Ratio -1.8971 -0.0321 0.1854 -0.0662 0.2084 0.38 0.42 0.62 0.8 0.03 Dividend Payout Ratio 0.1344 0.498 0.0577 0.3251 0.3796 Retention Ratio=(1DPR) 0.8656 0.502 0.9423 0.6749 0.6204

APPOLO ASHOK LEYLAND MRF TATA MOTORS CUMMIN SIND

41.25 35.2 3965 620.7 314.95

275 36.35 3294 663.2 255.7

GRAPH:
2.0000 1.5000 1.0000 0.5000 0.0000 Debt-Equity Ratio -0.5000 -1.0000 -1.5000 -2.0000 Return on Shares=Ln(P1/P0) Retention Ratio=(1DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:
REGRESSION ANALYSIS R Adjusted Square Square .173 -.653 R Std. Error of the Estimate 1.1444058

Model 1

R .417

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY

117

b. Dependent Variable: RETURN ON EQUITY ANOVA Model 1 Regression Residual Total Sum of Squares .550 2.619 3.169 df Mean Square 2 .275 2 1.310 4 F .210 Sig. .827

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -1.161 .548 2.130 Std. Error 1.575 2.070 3.134 .178 .432 Standardized Coefficients Beta T -.737 .265 .643 Sig. .538 .816 .586

118

ANALYSIS: The "R Square 0.173" indicates that 17.3% of the variability in share return, around the

sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the Ftest statistic is 0.210 with p-value of 0.827. The coefficient of debt equity ratio has estimated standard error of 2.070, t-statistic of 0.265 and p-value of 0.816 The coefficient of dividend payout ratio has estimated standard error of 3.134, t-statistic of 0.643 and p-value of 0.586. A simple summary of above output is the fitted line is y = 0.366 – 0.447x1 -0.719x2

Inference :
The "R Square of 0.173" indicates that the explanatory power of this regression is very weak. The coefficient of debt equity ratio has p-value of 0.816>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.586> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.538) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence,

Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

119

AUTOMOBILE SECTOR FOR Year 2008-09
COMPANY P1 P0 Return on Debt-Equity Shares=Ln(P1/P0) Ratio -0.8493 -0.6622 -0.7951 -1.2455 -0.5385 0.51 0.93 0.86 1.06 0.02 Dividend Payout Ratio 0.2454 0.8191 0.0698 0.3452 0.4846 Retention Ratio=(1DPR) 0.7546 0.1809 0.9302 0.6548 0.5154

APPOLO ASHOK LEYLAND MRF TATA MOTORS CUMMIN SIND

17.75 18.05 1784 180.6 185

41.5 35 3951 627.5 317

GRAPH:
2.0000 1.5000 1.0000 0.5000 0.0000 Debt-Equity Ratio -0.5000 -1.0000 -1.5000 -2.0000 Return on Shares=Ln(P1/P0) Retention Ratio=(1DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:
REGRESSION ANALYSIS R Adjusted Square Square .568 .137 R Std. Error of the Estimate .2487586

Model R 1 .754

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
120

ANOVA Model 1 Regression Residual Total Sum of Squares .163 .124 .287 df Mean Square 2 .081 2 .062 4 F 1.316 Sig. .432

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -.667 -.422 .337 Std. Error .289 .209 .441 -.661 .356 Standardized Coefficients Beta T -2.306 -1.422 .756 Sig. .148 .291 .524

121

ANALYSIS: The "R Square 0.568" indicates that 56.8% of the variability in share return, around the

sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the Ftest statistic is 0.1.316 with p-value of 0.432. The coefficient of debt equity ratio has estimated standard error of 0.209, t-statistic of -1.422 and p-value of 0.291 The coefficient of dividend payout ratio has estimated standard error of 0.441, t-statistic of 0.756 and p-value of 0.524. A simple summary of above output is the fitted line is y = -0.667 – 0.442x1 +0.337x2

Inference :
The "R Square of 0.568" indicates that the explanatory power of this regression is medium. The coefficient of debt equity ratio has p-value of 0.291>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.524> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.148) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence,

Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

122

AUTOMOBILE SECTOR FOR Year 2009-10
COMPANY P1 P0 Return on Debt-Equity Shares=Ln(P1/P0) Ratio -0.0305 1.1022 1.3191 1.4403 1.0341 0.66 0.98 0.22 1.11 0.01 Dividend Payout Ratio 0.1062 0.5492 0.0483 0.4428 0.6252 Retention Ratio=(1DPR) 0.8938 0.4508 0.9517 0.5572 0.3748

APPOLO ASHOK LEYLAND MRF TATA MOTORS CUMMIN SIND

17.75 55.85 6770.15 755.5 510.5

18.3 18.55 1810.1 178.95 181.5

GRAPH:
2.0000 1.5000 1.0000 0.5000 0.0000 Debt-Equity Ratio -0.5000 -1.0000 -1.5000 -2.0000 Return on Shares=Ln(P1/P0) Retention Ratio=(1DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:
REGRESSION ANALYSIS R Adjusted Square Square .137 -.727 R Std. Error of the Estimate .7678201

Model R 1 .370

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
123

ANOVA Model 1 Regression Residual Total Sum of Squares .186 1.179 1.366 df Mean Square 2 .093 2 .590 4 F .158 Sig. .863

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B .675 .011 .822 Std. Error .752 .815 1.447 .009 .368 Standardized Coefficients Beta T .898 .013 .556 Sig. .464 .991 .634

124

Analysis:
The "R Square 0.137" indicates that 13.7% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the Ftest statistic is 0.158 with p-value of 0.863. The coefficient of debt equity ratio has estimated standard error of 0.816, t-statistic of 0.013 and p-value of 0.991 The coefficient of dividend payout ratio has estimated standard error of 1.447, t-statistic of 0.556 and p-value of 0.634. A simple summary of above output is the fitted line is y = 0.675 +0.011x1 + 0.822x2

Inference :
The "R Square of 0.137" indicates that the explanatory power of this regression is very weak. The coefficient of debt equity ratio has p-value of 0.991>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.634> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.464) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

125

AUTOMOBILE SECTOR FOR Year 2010-11
COMPANY P1 P0 Return on Debt-Equity Shares=Ln(P1/P0) Ratio -0.0409 -0.0026 -0.0919 0.4707 0.3153 1.01 1 0.56 0.79 0.01 Dividend Payout Ratio 0.1477 0.4898 0.0698 0.8096 0.5849 Retention Ratio=(1DPR) 0.8523 0.5102 0.9302 0.1904 0.4151

APPOLO ASHOK LEYLAND MRF TATA MOTORS CUMMIN SIND

69.55 56.85 6271.1 1248.35 697.9

72.45 57 6875 779.7 509.15

GRAPH:
2.0000 1.5000 1.0000 0.5000 0.0000 Debt-Equity Ratio -0.5000 -1.0000 -1.5000 -2.0000 Return on Shares=Ln(P1/P0) Retention Ratio=(1DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:
REGRESSION ANALYSIS R Adjusted Square Square .876 .752 R Std. Error of the Estimate .1236427

Model 1

R .936

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
126

ANOVA Model 1 Regression Residual Total Sum of Squares .216 .301 .246 df Mean Square 2 .108 2 .015 4 F 7.061 Sig. .124

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -.071 -.137 .698 Std. Error .155 .152 .204 -.228 .867 Standardized Coefficients Beta T -.457 -.901 3.423 Sig. .692 .463 .076

127

Analysis:
The "R Square 0.876" indicates that 87.6% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the Ftest statistic is 7.061 with p-value of 0.124. The coefficient of debt equity ratio has estimated standard error of 0.152, t-statistic of -0.901 and p-value of 0.463 The coefficient of dividend payout ratio has estimated standard error of 0.204, t-statistic of 3.423 and p-value of 0.076. A simple summary of above output is the fitted line is y = -0.071 – 0.137x1 -0.698x2

Inference :
The "R Square of 0.876" indicates that the explanatory power of this regression is great. The coefficient of debt equity ratio has p-value of 0.463>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.076> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.692) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

128

PHARMA SECTOR FOR Year 2006-07
COMPANY Return on DebtShares=Ln(P1/P0) Equity Ratio AUROBINO 682 687.5 -0.0080 2.13 DR.REDDIES LAB 725 1449.8 -0.6930 0.08 GLAXO SMITH 1121.25 1528 -0.3095 0.08 IND-SWIFT 56.35 117.35 -0.7336 1.19 AJANTA PHARMA 71.7 77.5 -0.0778 0.9 P1 P0 Dividend Payout Ratio 0.0681 0.0625 0.5488 0.109 0.1998 Retention Ratio=(1DPR) 0.9319 0.9375 0.4512 0.891 0.8002

GRAPH:
2.0000 1.5000 1.0000 0.5000 0.0000 Debt-Equity Ratio -0.5000 -1.0000 -1.5000 -2.0000 Return on Shares=Ln(P1/P0) Retention Ratio=(1DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:
REGRESSION ANALYSIS R Adjusted Square Square .487 -.026 R Std. Error of the Estimate .3422128

Model 1

R .698

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
129

ANOVA Model 1 Regression Residual Total Sum of Squares .222 .234 .456 df Mean Square 2 .111 2 .117 4 F .949 Sig. .513

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -.830 .310 .982 Std. Error .379 .233 .981 .787 .592 Standardized Coefficients Beta T -2.188 1.328 1.000 Sig. .160 .315 .423

130

Analysis:
The "R Square 0.487" indicates that 48.7% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the Ftest statistic is 0.949 with p-value of 0.513. The coefficient of debt equity ratio has estimated standard error of 0.233, t-statistic of 1.328 and p-value of 0.315 The coefficient of dividend payout ratio has estimated standard error of 0.981, t-statistic of 1.000 and p-value of 0.423. A simple summary of above output is the fitted line is y = -0.830 +0.310x1 + 0.982x2

Inference :
The "R Square of 0.487" indicates that the explanatory power of this regression is medium. The coefficient of debt equity ratio has p-value of 0.315>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.423> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.160) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

131

PHARMA SECTOR FOR Year 2007-08
COMPANY P1 P0 Return on DebtShares=Ln(P1/P0) Equity Ratio -0.8496 1.44 -0.1880 0.1 -0.0560 0.1 -0.2115 1.38 0.1466 1.23 Dividend Payout Ratio 0.0706 0.1552 0.6635 0.1379 0.1924 Retention Ratio=(1DPR) 0.9294 0.8448 0.3365 0.8621 0.8076

AUROBINO DR.REDDIES LAB GLAXO SMITH IND-SWIFT AJANTA PHARMA

291.6 590 1040.15 45 82.5

682 712 1100.05 55.6 71.25

GRAPH:
2.0000 1.5000 1.0000 0.5000 0.0000 Debt-Equity Ratio -0.5000 -1.0000 -1.5000 -2.0000 Return on Shares=Ln(P1/P0) Retention Ratio=(1DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:
REGRESSION ANALYSIS R Adjusted Square Square .201 -.598 R Std. Error of the Estimate .4721277

Model R 1 .449

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY

132

b. Dependent Variable: RETURN ON EQUITY ANOVA Model 1 Regression Residual Total Sum of Squares .112 .446 .558 df Mean Square 2 .056 2 .223 4 F .252 Sig. .799

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -.298 -.076 .539 Std. Error .669 .450 1.299 -.141 .334 Standardized Coefficients Beta T -.445 -.170 .415 Sig. .700 .881 .719

133

Analysis:
The "R Square 0.0.201" indicates that 20.1% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the Ftest statistic is 0.252 with p-value of 0.799. The coefficient of debt equity ratio has estimated standard error of 0.450, t-statistic of -0.170 and p-value of 0.881 The coefficient of dividend payout ratio has estimated standard error of 1.299, t-statistic of 0.415 and p-value of 0.719. A simple summary of above output is the fitted line is y = -0.298– 0.076x1 + 0.539x2

Inference :
The "R Square of 0.201" indicates that the explanatory power of this regression is very weak. The coefficient of debt equity ratio has p-value of 0.881>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.719> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.700) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

134

PHARMA SECTOR FOR Year 2008-09
COMPANY Return on DebtShares=Ln(P1/P0) Equity Ratio AUROBINO 188.2 297.5 -0.4579 1.6 DR.REDDIES LAB 490 598 -0.1992 0.12 GLAXO SMITH 1089.9 1050.05 0.0372 0.12 IND-SWIFT 23.4 44.6 -0.6450 1.33 AJANTA PHARMA 51.5 80.5 -0.4467 1.58 P1 P0 Dividend Payout Ratio 0.2202 0.2194 0.6875 0.0906 0.1601 Retention Ratio=(1DPR) 0.7798 0.7806 0.3125 0.9094 0.8399

GRAPH;
2.0000 1.5000 1.0000 0.5000 0.0000 Debt-Equity Ratio -0.5000 -1.0000 -1.5000 -2.0000 Return on Shares=Ln(P1/P0) Retention Ratio=(1DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:
REGRESSION ANALYSIS R Adjusted Square Square .918 .835 R Std. Error of the Estimate .1075149

Model R 1 ..958

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
135

ANOVA Model 1 Regression Residual Total Sum of Squares .257 .023 .280 df Mean Square 2 .129 2 .012 4 F 11.128 Sig. .082

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -.368 -.163 .652 Std. Error .163 .093 .301 -.470 .582 Standardized Coefficients Beta T -2.252 -1.746 2.164 Sig. .153 .223 .163

136

Analysis:
The "R Square 0.918" indicates that 91.8% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the Ftest statistic is 11.128 with p-value of 0.082. The coefficient of debt equity ratio has estimated standard error of 0.093, t-statistic of -1.746 and p-value of 0.223 The coefficient of dividend payout ratio has estimated standard error of 0.301, t-statistic of 2.164 and p-value of 0.163. A simple summary of above output is the fitted line is y = -0.368 – 0.163x1 + 0.652x2

Inference :
The "R Square of 0.918" indicates that the explanatory power of this regression is great. The coefficient of debt equity ratio has p-value of 0.223>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.163> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.153) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

137

PHARMA SECTOR FOR Year 2009-10
COMPANY Return on DebtShares=Ln(P1/P0) Equity Ratio AUROBINO 961.05 187.5 1.6342 1.02 DR.REDDIES LAB 1281 484.35 0.9726 0.1 GLAXO SMITH 1784 1090 0.4927 0.1 IND-SWIFT 66.5 24 1.0191 1.41 AJANTA PHARMA 182 51.9 1.2547 1.16 P1 P0 Dividend Payout Ratio 0.0616 0.2619 0.5743 0.0763 0.1674 Retention Ratio=(1DPR) 0.9384 0.7381 0.4257 0.9237 0.8326

GRAPH:
2.0000 1.5000 1.0000 0.5000 0.0000 Debt-Equity Ratio -0.5000 -1.0000 -1.5000 -2.0000 Return on Shares=Ln(P1/P0) Retention Ratio=(1DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:
REGRESSION ANALYSIS R Adjusted Square Square .756 .512 R Std. Error of the Estimate .2916608

Model R 1 .870

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
138

ANOVA Model 1 Regression Residual Total Sum of Squares .528 .170 .698 df Mean Square 2 .264 2 .085 4 F 3.101 Sig. .244

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B 1.667 -.154 -2.079 Std. Error .560 .401 1.180 -.227 -1.043 Standardized Coefficients Beta T 2.974 -.385 -1.763 Sig. .097 .738 .220

139

Analysis:
The "R Square 0.756" indicates that 75.6% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the Ftest statistic is 3.101 with p-value of 0.244. The coefficient of debt equity ratio has estimated standard error of 0.401, t-statistic of -0.385 and p-value of 0.738 The coefficient of dividend payout ratio has estimated standard error of 1.180, t-statistic of 1.763 and p-value of 0.220. A simple summary of above output is the fitted line is y = -1.667 – 0.154x1 -2.079x2

Inference :
The "R Square of 0.756" indicates that the explanatory power of this regression is good. The coefficient of debt equity ratio has p-value of 0.738>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.220> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.097) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

140

PHARMA SECTOR FOR Year 2010-11
COMPANY Return on DebtShares=Ln(P1/P0) Equity Ratio AUROBINO 195.95 956.95 -1.5859 0.9 DR.REDDIES LAB 1639.05 1260 0.2630 0.24 GLAXO SMITH 2062.95 1773.9 0.1510 0.24 IND-SWIFT 96.85 68.6 0.3449 1.64 AJANTA PHARMA 200.3 182.4 0.0936 0.73 P1 P0 Dividend Payout Ratio 0.1151 0.342 0.6954 0.0562 0.1464 Retention Ratio=(1DPR) 0.8849 0.658 0.3046 0.9438 0.8536

GRAPH:
2.0000 1.5000 1.0000 0.5000 0.0000 Debt-Equity Ratio -0.5000 -1.0000 -1.5000 -2.0000 Return on Shares=Ln(P1/P0) Retention Ratio=(1DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:
REGRESSION ANALYSIS R Adjusted Square Square .137 -.726 R Std. Error of the Estimate 1.0646559

Model R 1 .370

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
141

ANOVA Model 1 Regression Residual Total Sum of Squares .360 2.267 2.627 df Mean Square 2 .180 2 1.133 4 F .159 Sig. .863

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -1.010 .510 1.775 Std. Error 1.907 1.451 3.219 .364 .570 Standardized Coefficients Beta T -.530 .352 .551 Sig. .649 .759 .637

142

Analysis:
The "R Square 0.137" indicates that 13.7% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the Ftest statistic is 0.159 with p-value of 0.863. The coefficient of debt equity ratio has estimated standard error of 1.451, t-statistic of -0.352 and p-value of 0.759 The coefficient of dividend payout ratio has estimated standard error of 3.219, t-statistic of 0.551 and p-value of 0.637. A simple summary of above output is the fitted line is y = -1.010+0.510x1 + 1.775x2

Inference :
The "R Square of 0.137" indicates that the explanatory power of this regression is poor. The coefficient of debt equity ratio has p-value of 0.759>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.637> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.649) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

143

POWER SECTOR FOR Year 2006-07
COMPANY Return on DebtShares=Ln(P1/P0) Equity Ratio BHEL 2256.1 2294 -0.0167 0.01 1104 -1.7184 0.41 CROPTON GREAVES 198 NEYVELLI 50.25 76 -0.4137 0.16 TATA POWER 509.45 584.3 -0.1371 0.61 TORRENTPOWER 58.85 70.55 -0.1813 0.6 P1 P0 Dividend Payout Ratio 0.2952 0.2793 0.5447 0.316 0.3001 Retention Ratio=(1DPR) 0.7048 0.7207 0.4553 0.684 0.6999

GRAPH:;
2.0000 1.5000 1.0000 0.5000 0.0000 Debt-Equity Ratio -0.5000 -1.0000 -1.5000 -2.0000 Return on Shares=Ln(P1/P0) Retention Ratio=(1DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:
REGRESSION ANALYSIS R Adjusted Square Square .027 -.946 R Std. Error of the Estimate .9761608

Model R 1 ..164

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
144

ANOVA Model 1 Regression Residual Total Sum of Squares .053 1.906 1.959 df Mean Square 2 .026 2 .953 4 F .028 Sig. .973

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -.731 -.151 .842 Std. Error 2.054 1.967 4.719 -.058 .134 Standardized Coefficients Beta T -.356 -.077 .178 Sig. .756 .946 875

145

Analysis:
The "R Square 0.027" indicates that 2.7% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the Ftest statistic is 0.028 with p-value of 0.973. The coefficient of debt equity ratio has estimated standard error of 1.967, t-statistic of -0.077 and p-value of 0.946 The coefficient of dividend payout ratio has estimated standard error of 4.719, t-statistic of 0.178 and p-value of 0.875. A simple summary of above output is the fitted line is y = -0.731 – 0.151x1 + 0.842x2

Inference :
The "R Square of 0.027" indicates that the explanatory power of this regression is very poor. The coefficient of debt equity ratio has p-value of 0.946>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.875> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.756) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

146

POWER SECTOR FOR Year 2007-08
COMPANY Return on DebtShares=Ln(P1/P0) Equity Ratio BHEL 2032 2155 -0.0588 0.01 CROPTON GREAVES 276 189 0.3787 0.1 NEYVELLI 118.9 52.55 0.8165 0.18 TATA POWER 1171.9 496.1 0.8596 0.39 TORRENTPOWER 113 57.55 0.6747 0.88 P1 P0 Dividend Payout Ratio 0.309 0.2185 0.4509 0.3084 0.314 Retention Ratio=(1DPR) 0.691 0.7815 0.5491 0.6916 0.686

GRAPH:
3.0000 2.5000 2.0000 1.5000 1.0000 0.5000 Debt-Equity Ratio 0.0000 -0.5000 -1.0000 -1.5000 -2.0000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:
REGRESSION ANALYSIS R Adjusted Square Square .453 -.095 R Std. Error of the Estimate .3988516

Model R 1 .673

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
147

ANOVA Model 1 Regression Residual Total Sum of Squares .263 .318 .581 df Mean Square 2 .131 2 .159 4 F .827 Sig. .547

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -.253 .568 1.904 Std. Error .803 .575 2.396 .517 .416 Standardized Coefficients Beta T -.315 .988 .795 Sig. .783 .427 .510

148

Analysis:
The "R Square 0.0.453" indicates that 45.3% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the Ftest statistic is 0.827with p-value of 0.547. The coefficient of debt equity ratio has estimated standard error of 0.575, t-statistic of 0.988 and p-value of 0.427 The coefficient of dividend payout ratio has estimated standard error of 2.396, t-statistic of 0.795 and p-value of 0.510. A simple summary of above output is the fitted line is y = -0.253 +0.568x1 + 1.904x2

Inference :
The "R Square of 0.453" indicates that the explanatory power of this regression is medium. The coefficient of debt equity ratio has p-value of 0.427>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.510> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.783) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

149

POWER SECTOR FOR Year 2008-09
COMPANY Return on DebtShares=Ln(P1/P0) Equity Ratio BHEL 1510 1895 -0.2271 0.01 CROPTON GREAVES 124.5 254 -0.7130 0.04 NEYVELLI 83.6 116.7 -0.3336 0.31 TATA POWER 765.3 1174.5 -0.4283 0.61 TORRENTPOWER 74.45 116 -0.4435 1.01 P1 P0 Dividend Payout Ratio 0.3102 0.2159 0.3563 0.312 0.271 Retention Ratio=(1DPR) 0.6898 0.7841 0.6437 0.688 0.729

GRAPH:
3.0000 2.5000 2.0000 1.5000 1.0000 0.5000 Debt-Equity Ratio 0.0000 -0.5000 -1.0000 -1.5000 -2.0000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:
REGRESSION ANALYSIS R Adjusted Square Square .696 .392 R Std. Error of the Estimate .1409651

Model R 1 .834

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
150

ANOVA Model 1 Regression Residual Total Sum of Squares .091 .040 .131 df Mean Square 2 .045 2 .020 4 F Sig.

2.289 .304

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -1.264 -.015 2.807 Std. Error .399 .168 1.341 -.035 .836 Standardized Coefficients Beta T -3.165 -.091 2.139 Sig. .087 .936 .166

151

Analysis:
The "R Square 0.696" indicates that 69.6% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 2.289 with p-value of 0.304. The coefficient of debt equity ratio has estimated standard error of 0.168, t-statistic of -0.091 and p-value of 0.936 The coefficient of dividend payout ratio has estimated standard error of 1.341, tstatistic of 2.139 and p-value of 0.166. A simple summary of above output is the fitted line is y = -1.264 – 0.015x1 + 2.875x2

Inference :
The "R Square of 0.696" indicates that the explanatory power of this regression is good. The coefficient of debt equity ratio has p-value of 0.936>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.166> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.087) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

152

POWER SECTOR FOR Year 2009-10
COMPANY Return on DebtShares=Ln(P1/P0) Equity Ratio BHEL 2379 1477 0.4767 0.01 CROPTON GREAVES 260.5 129.8 0.6966 0.02 NEYVELLI 145.3 84.4 0.5432 0.43 TATA POWER 1372.6 794.55 0.5467 0.57 TORRENTPOWER 293 76.5 1.3429 0.81 P1 P0 Dividend Payout Ratio 0.3054 0.1528 0.4781 0.3408 0.1975 Retention Ratio=(1DPR) 0.6946 0.8472 0.5219 0.6592 0.8025

GRAPH;
3.0000 2.5000 2.0000 1.5000 1.0000 0.5000 Debt-Equity Ratio 0.0000 -0.5000 -1.0000 -1.5000 -2.0000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:
REGRESSION ANALYSIS R Adjusted Square Square .832 .663 R Std. Error of the Estimate .2070339

Model R 1 .912

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
153

ANOVA Model 1 Regression Residual Total Sum of Squares .423 .086 .509 df Mean Square 2 .212 2 .043 4 F Sig.

4.938 .168

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B .976 .749 -1.798 Std. Error .268 .299 .816 .734 -.645 Standardized Coefficients Beta T 3.644 2.509 -2.203 Sig. .068 .129 .159

154

Analysis:
The "R Square 0.832" indicates that 83.2% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 4.938 with p-value of 0.168. The coefficient of debt equity ratio has estimated standard error of 0.299, t-statistic of 2.509 and p-value of 0.129 The coefficient of dividend payout ratio has estimated standard error of 0.816, tstatistic of -2.203 and p-value of 0.159. A simple summary of above output is the fitted line is y = 0.976+0.749x1 -1.798x2

Inference :
The "R Square of 0.832" indicates that the explanatory power of this regression is great. The coefficient of debt equity ratio has p-value of 0.129>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.159> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.068) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

155

POWER SECTOR FOR Year 2010-11
COMPANY Return on DebtShares=Ln(P1/P0) Equity Ratio BHEL 2062.65 2416 -0.1581 0.01 CROPTON GREAVES 273.8 274.4 -0.0022 0.01 NEYVELLI 104.05 145 -0.3319 0.39 TATA POWER 1330.35 1355.25 -0.0185 0.62 TORRENTPOWER 250.8 301 -0.1825 0.64 P1 P0 Dividend Payout Ratio 0.2867 0.2368 0.3141 0.3326 0.2833 Retention Ratio=(1DPR) 0.7133 0.7632 0.6859 0.6674 0.7167

GRAPH:
3.0000 2.5000 2.0000 1.5000 1.0000 0.5000 Debt-Equity Ratio 0.0000 -0.5000 -1.0000 -1.5000 -2.0000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:
REGRESSION ANALYSIS R Adjusted Square Square .113 -.775 R Std. Error of the Estimate .1796007

Model R 1 .336

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
156

ANOVA Model 1 Regression Residual Total Sum of Squares .008 .065 .073 df Mean Square 2 .004 2 .032 4 F .127 Sig. .887

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B .267 .039 -1.439 Std. Error .879 .383 3.282 .090 -.388 Standardized Coefficients Beta T .303 .101 -.438 Sig. .790 .928 .704

157

Analysis:
The "R Square 0.113" indicates that 11.3% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 0.127 with p-value of 0.887. The coefficient of debt equity ratio has estimated standard error of 0.383, t-statistic of 0.101 and p-value of 0.928 The coefficient of dividend payout ratio has estimated standard error of 3.282, tstatistic of -0.438 and p-value of 0.704. A simple summary of above output is the fitted line is y = 0.267+ 0.039x1 -1.439x2

Inference :
The "R Square of 0.113" indicates that the explanatory power of this regression is very poor. The coefficient of debt equity ratio has p-value of 0.928>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.704> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.790) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

158

FMCG SECTOR FOR Year 2006-07
Years P1 P0 Return on DebtShares=Ln(P1/P0) Equity Ratio -0.2727 0.02 0.1383 0.03 0.1900 0.02 0.3819 0.01 0.1954 0.01 Dividend Payout Ratio 0.9247 0.9824 0.8205 0.7508 0.8665 Retention Ratio=(1DPR) 0.0753 0.0176 0.1795 0.2492 0.1335

2006-07 2007-08 2008-09 2009-10 2010-11

332.4 382.35 470.75 675.25 823.45

436.6 332.95 389.3 460.9 677.3

GRAPH:
3.0000 2.5000 2.0000 1.5000 1.0000 0.5000 Debt-Equity Ratio 0.0000 -0.5000 -1.0000 -1.5000 -2.0000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:
REGRESSION ANALYSIS R Adjusted Square Square .959 .918 R Std. Error of the Estimate .1665402

Model R 1 .979

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
159

ANOVA Model 1 Regression Residual Total Sum of Squares 1.305 .055 1.361 df Mean Square 2 .653 2 .028 4 F Sig.

23.532 .041

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B .078 -1.049 -.768 Std. Error .223 .185 .445 -.859 -.262 Standardized Coefficients Beta T .350 -5.663 -1.725 Sig. .760 .030 .227

160

Analysis:
The "R Square 0.959" indicates that 95.9% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 23.532 with p-value of 0.041. The coefficient of debt equity ratio has estimated standard error of 0.185, t-statistic of -5.663 and p-value of 0.030 The coefficient of dividend payout ratio has estimated standard error of 0.445, tstatistic of -1.725 and p-value of 0.227. A simple summary of above output is the fitted line is y = 0.078 – 1.049x1 -0.768x2

Inference :
The "R Square of 0.959" indicates that the explanatory power of this regression is great. The coefficient of debt equity ratio has p-value of 0.030>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.227> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.760) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

161

FMCG SECTOR FOR Year 2007-08
COMPANY Return on DebtShares=Ln(P1/P0) Equity Ratio DABAR 111 94 0.1662 0.03 ITC 204.2 146.5 0.3321 0.02 GODREJ 124 143 -0.1426 0.89 MC RUSSEL INDIA 65.9 57.8 0.1311 0.85 BRITANIA 1305 1210 0.0756 0.14 P1 P0 Dividend Payout Ratio 0.4786 0.4945 0.7326 0.2712 0.2634 Retention Ratio=(1DPR) 0.5214 0.5055 0.2674 0.7288 0.7366

GRAPH:
3.0000 2.5000 2.0000 1.5000 1.0000 0.5000 Debt-Equity Ratio 0.0000 -0.5000 -1.0000 -1.5000 -2.0000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:
REGRESSION ANALYSIS R Adjusted Square Square .553 .107 R Std. Error of the Estimate .1622431

Model R 1 ..744

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
162

ANOVA Model 1 Regression Residual Total Sum of Squares .065 2.395 6.066 df Mean Square 2 .033 2 1.198 4 F 1.239 Sig. .447

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B .320 -.241 -.256 Std. Error .204 .187 .431 -.623 -.288 Standardized Coefficients Beta T 1.572 -1.283 -.593 Sig. .256 .328 .613

163

Analysis:
The "R Square 0.553" indicates that 55.3% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 1.239 with p-value of 0.447. The coefficient of debt equity ratio has estimated standard error of 0.187, t-statistic of -1.283 and p-value of 0.328 The coefficient of dividend payout ratio has estimated standard error of 0.431, tstatistic of -0.593 and p-value of 0.613. A simple summary of above output is the fitted line is y = 0.320 – 0.241x1 -0.256x2

Inference :
The "R Square of 0.553" indicates that the explanatory power of this regression is great. The coefficient of debt equity ratio has p-value of 0.328>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.613> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.256) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

164

FMCG SECTOR FOR Year 2008-09
COMPANY Return on DebtShares=Ln(P1/P0) Equity Ratio DABAR 100 105.3 -0.0516 0.19 ITC 185.1 211.1 -0.1314 0.01 GODREJ 134.7 124 0.0828 0.12 MC RUSSEL INDIA 64.5 66.95 -0.0373 0.69 BRITANIA 1399 1332 0.0491 0.03 P1 P0 Dividend Payout Ratio 0.4741 0.5006 0.7458 0.2884 0.6197 Retention Ratio=(1DPR) 0.5259 0.4994 0.2542 0.7116 0.3803

GRAPH;
3.0000 2.5000 2.0000 1.5000 1.0000 0.5000 Debt-Equity Ratio 0.0000 -0.5000 -1.0000 -1.5000 -2.0000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:
REGRESSION ANALYSIS R Adjusted Square Square .824 .648 R Std. Error of the Estimate .0505108

Model 1

R .908

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
165

ANOVA Model 1 Regression Residual Total Sum of Squares .024 .005 .029 df Mean Square 2 .012 2 .003 4 F Sig.

4.668 .176

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -.443 .691 .298 Std. Error .144 .227 .139 1.387 .977 Standardized Coefficients Beta T -3.077 3.052 2.150 Sig. .091 .093 .165

166

Analysis:
The "R Square 0.824" indicates that 82.4% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 4.668 with p-value of 0.176. The coefficient of debt equity ratio has estimated standard error of 0.227, t-statistic of 3.052 and p-value of 0.093 The coefficient of dividend payout ratio has estimated standard error of 0.139, tstatistic of 2.150 and p-value of 0.615. A simple summary of above output is the fitted line is y = -0.443 +0.691x1 + 0.298x2

Inference :
The "R Square of 0.824" indicates that the explanatory power of this regression is great. The coefficient of debt equity ratio has p-value of 0.093>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.165> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.091) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

167

FMCG SECTOR FOR Year 2009-10
COMPANY Return on DebtShares=Ln(P1/P0) Equity Ratio DABAR 158.85 97 0.4932 0.14 ITC 263.6 183 0.3649 0.01 GODREJ 258.05 127.5 0.7050 0.01 MC RUSSEL INDIA 268.8 67.5 1.3818 0.35 BRITANIA 1600.1 1390 0.1408 1.08 P1 P0 Dividend Payout Ratio 0.4686 1.0963 0.5934 0.2124 0.5977 Retention Ratio=(1DPR) 0.5314 -0.0963 0.4066 0.7876 0.4023

GRAPH:
3.0000 2.5000 2.0000 1.5000 1.0000 0.5000 Debt-Equity Ratio 0.0000 -0.5000 -1.0000 -1.5000 -2.0000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:
REGRESSION ANALYSIS R Adjusted Square Square .682 .364 R Std. Error of the Estimate .3778482

Model 1

R .826

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
168

ANOVA Model 1 Regression Residual Total Sum of Squares .613 .286 .898 df Mean Square 2 .306 2 .143 4 F Sig.

2.0146 .318

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B 1.477 -.536 -1.162 Std. Error .449 .435 .606 -.507 -.788 Standardized Coefficients Beta T 3.290 -1.232 -1.917 Sig. .081 .343 .195

169

Analysis:
The "R Square 0.682" indicates that 68.2% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 2.0146 with p-value of 0.318. The coefficient of debt equity ratio has estimated standard error of 0.435, t-statistic of -1.232 and p-value of 0.343 The coefficient of dividend payout ratio has estimated standard error of 0.606, tstatistic of -1.917 and p-value of 0.195. A simple summary of above output is the fitted line is y = 1.477 – 0.536x1 +1.162x2

Inference :
The "R Square of 0.682" indicates that the explanatory power of this regression is good. The coefficient of debt equity ratio has p-value of 0.343>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.195> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.081) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

170

FMCG SECTOR FOR Year 2010-11
COMPANY Return on DebtShares=Ln(P1/P0) Equity Ratio DABAR 96.1 158.35 -0.4994 0.23 ITC 182.1 263.95 -0.3712 0.01 GODREJ 365.5 261 0.3367 0.18 MC RUSSEL INDIA 252.6 259.8 -0.0281 0.22 BRITANIA 372.5 1600 -1.4575 0.96 P1 P0 Dividend Payout Ratio 0.4942 0.8024 0.4519 0.2738 0.621 Retention Ratio=(1DPR) 0.5058 0.1976 0.5481 0.7262 0.379

GRAPH:
3.0000 2.5000 2.0000 1.5000 1.0000 0.5000 Debt-Equity Ratio 0.0000 -0.5000 -1.0000 -1.5000 -2.0000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:
REGRESSION ANALYSIS R Adjusted Square Square .847 .694 R Std. Error of the Estimate .3721916

Model R 1 .902

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
171

ANOVA Model 1 Regression Residual Total Sum of Squares 1.533 .277 1.810 df Mean Square 2 .766 2 .139 4 F Sig.

5.533 .153

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B .806 -1.469 -1.400 Std. Error .544 .505 .945 -.805 -.410 Standardized Coefficients Beta T 1.483 -2.906 -1.482 Sig. .276 .101 .277

172

Analysis:
The "R Square 0.682" indicates that 68.20% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 5.533with p-value of 0.153. The coefficient of debt equity ratio has estimated standard error of 0.505, t-statistic of -2.906 and p-value of 0.101 The coefficient of dividend payout ratio has estimated standard error of 0.945, tstatistic of -1.482and p-value of 0.227. A simple summary of above output is the fitted line is y = 0.866 – 1.469x1 -1.400x2

Inference :
The "R Square of 0.8471" indicates that the explanatory power of this regression is great. The coefficient of debt equity ratio has p-value of 0.101>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.277> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.276) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

173

GAS & OIL SECTOR FOR Year 2006-07
COMPANY Return on DebtShares=Ln(P1/P0) Equity Ratio ABAN OFFSHORE 2011 1220 0.4998 2.92 GAIL 264.95 317.55 -0.1811 0.12 HINDUSTAN PETRO 255 286.2 -0.1154 1.1 INDIAN OIL 400 609.75 -0.4216 0.78 OIL & NATURAL GAS 880 1316 -0.4024 0.24 P1 P0 Dividend Payout Ratio 0.1648 0.4061 0.4509 0.3483 0.4885 Retention Ratio=(1DPR) 0.8352 0.5939 0.5491 0.6517 0.5115

GRAPH:
3.0000 2.5000 2.0000 1.5000 1.0000 0.5000 Debt-Equity Ratio 0.0000 -0.5000 -1.0000 -1.5000 -2.0000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:
REGRESSION ANALYSIS R Adjusted Square Square .822 .644 R Std. Error of the Estimate .2230374

Model 1

R .907

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
174

ANOVA Model 1 Regression Residual Total Sum of Squares .459 .099 .559 df Mean Square 2 .230 2 .050 4 F 4.614 Sig. .178

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -.269 .265 -.346 Std. Error .882 .207 1.838 .802 -.118 Standardized Coefficients Beta T -.305 1.283 .-188 Sig. .789 .328 .868

175

ANALYSIS:
The "R Square 0.822" indicates that 82.22% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 4.614 with p-value of 0.178. The coefficient of debt equity ratio has estimated standard error of .207, t-statistic of 1.283 and p-value of 0.328 The coefficient of dividend payout ratio has estimated standard error of 1.838, tstatistic of -0.188 and p-value of 0.868. A simple summary of above output is the fitted line is y = -0.269 +0.265x1 -0.346x2

Inference :
The "R Square of 0.822" indicates that the explanatory power of this regression is great. The coefficient of debt equity ratio has p-value of 0.329>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.868> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.789) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

176

GAS & OIL SECTOR FOR Year 2007-08
COMPANY Return on DebtShares=Ln(P1/P0) Equity Ratio ABAN OFFSHORE 3041 1940 0.4495 3.76 GAIL 426.95 264 0.4807 0.1 HINDUSTAN PETRO 238.6 228.5 0.0433 1.59 INDIAN OIL 447.1 386.5 0.1457 0.86 OIL & NATURAL GAS 986 819 0.1856 0.18 P1 P0 Dividend Payout Ratio 0.1775 0.3803 0.1047 0.1051 0.4794 Retention Ratio=(1DPR) 0.8225 0.6197 0.8953 0.8949 0.5206

GRAPH:
3.0000 2.5000 2.0000 1.5000 1.0000 0.5000 Debt-Equity Ratio 0.0000 -0.5000 -1.0000 -1.5000 -2.0000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:
REGRESSION ANALYSIS R Adjusted Square Square .383 -.234 R Std. Error of the Estimate .2152222

Model 1

R .619

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
177

ANOVA Model 1 Regression Residual Total Sum of Squares .058 .093 .150 df Mean Square 2 .029 2 .046 4 F .621 Sig. .617

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -.037 .079 .781 Std. Error .284 .086 .756 .161 .689 Standardized Coefficients Beta T -.130 .923 1.302 Sig. .909 .454 .4

178

ANALYSIS:
The "R Square 0.383" indicates that 38.3% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 0.621 with p-value of 0.617. The coefficient of debt equity ratio has estimated standard error of 0.086, t-statistic of 0.923 and p-value of 0.454 The coefficient of dividend payout ratio has estimated standard error of 0.756, tstatistic of 1.302 and p-value of 0.400. A simple summary of above output is the fitted line is y = -0.037 –+0.079x1 + 0.781x2

Inference :
The "R Square of 0.383" indicates that the explanatory power of this regression is very weak . The coefficient of debt equity ratio has p-value of 0.454>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.400> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.909) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.
179

GAS & OIL SECTOR FOR Year 2008-09
COMPANY Return on DebtShares=Ln(P1/P0) Equity Ratio ABAN OFFSHORE 402 3035 -2.0215 2.49 GAIL 243 423.95 -0.5566 0.08 HINDUSTAN PETRO 235.4 236.05 -0.0028 2.12 INDIAN OIL 386.1 452 -0.1576 1.02 OIL & NATURAL GAS 778.2 1015 -0.2657 0.2 P1 P0 Dividend Payout Ratio 0.1529 0.3705 0.3617 0.3611 0.4965 Retention Ratio=(1DPR) 0.8471 0.6295 0.6383 0.6389 0.5035

GRAPH:
3.0000 2.5000 2.0000 1.5000 1.0000 0.5000 Debt-Equity Ratio 0.0000 -0.5000 -1.0000 -1.5000 -2.0000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:
REGRESSION ANALYSIS R Adjusted Square Square .777 .555 R Std. Error of the Estimate .5469322

Model R 1 .882

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
180

ANOVA Model 1 Regression Residual Total Sum of Squares 2.088 .598 2.678 df Mean Square 2 1.044 2 .299 4 F 3.419 Sig. .223

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -3.603 .295 7.613 Std. Error 1.604 .390 3.415 .394 1.447 Standardized Coefficients Beta T -2.246 .756 2.203 Sig. .154 .528 .158

181

ANALYSIS:
The "R Square 0.777" indicates that 77.7% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 3.419 with p-value of 0.223. The coefficient of debt equity ratio has estimated standard error of 0.390, t-statistic of 0.756 and p-value of 0.528 The coefficient of dividend payout ratio has estimated standard error of 3.415, tstatistic of 2.203 and p-value of 0.158. A simple summary of above output is the fitted line is y = -3.603 +0.295x1 -7.613x2

Inference :
The "R Square of 0.777" indicates that the explanatory power of this regression is good. The coefficient of debt equity ratio has p-value of 0.528>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.158> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.154) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

182

GAS & OIL SECTOR FOR Year 2009-10
COMPANY Return on DebtShares=Ln(P1/P0) Equity Ratio ABAN OFFSHORE 1169.3 396 1.0827 3.7 GAIL 409.15 251.1 0.4882 0.09 HINDUSTAN PETRO 230 238.05 -0.0344 1.84 INDIAN OIL 296 392 -0.2809 0.88 OIL & NATURAL GAS 1092.55 805.5 0.3048 0.19 P1 P0 Dividend Retention Payout Ratio=(1Ratio DPR) 0.0884 0.9116 0.3536 0.6464 0.3641 0.6359 0.3586 0.6414 0.4902 0.5098

GRAPH:
3.0000 2.5000 2.0000 1.5000 1.0000 0.5000 Debt-Equity Ratio 0.0000 -0.5000 -1.0000 -1.5000 -2.0000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:
REGRESSION ANALYSIS R Adjusted Square Square .493 -.013 R Std. Error of the Estimate .5270939

Model R 1 .702

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
183

ANOVA Model 1 Regression Residual Total Sum of Squares .541 .556 1.097 df Mean Square 2 .272 2 .278 4 F .974 Sig. .507

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B 1.588 -.108 -3.420 Std. Error 1.777 .384 3.893 -.307 -.961 Standardized Coefficients Beta T .894 -.281 -.878 Sig. .466 .805 .472

184

ANALYSIS:
The "R Square 0.493" indicates that 49.3% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 0.974 with p-value of 0.507. The coefficient of debt equity ratio has estimated standard error of 0.384, t-statistic of -0.281 and p-value of 0.805 The coefficient of dividend payout ratio has estimated standard error of 3.893, tstatistic of -0.878 and p-value of 0.472. A simple summary of above output is the fitted line is y = 1.588 – 0.108x1 -3.420x2

Inference :
The "R Square of 0.8471" indicates that the explanatory power of this regression is moderate. The coefficient of debt equity ratio has p-value of 0.805>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.472> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.466) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

185

GAS & OIL SECTOR FOR Year 2010-11
COMPANY Return on DebtShares=Ln(P1/P0) Equity Ratio ABAN OFFSHORE 616.25 1197.4 -0.6643 1.88 GAIL 464 410.25 0.1231 0.12 HINDUSTAN PETRO 230.45 287.1 -0.2198 1.99 INDIAN OIL 332.85 299.1 0.1069 0.95 OIL & NATURAL GAS 291.3 1083 -1.3131 0.18 P1 P0 Dividend Payout Ratio 0.0913 0.3107 0.358 0.3579 0.4598 Retention Ratio=(1DPR) 0.9087 0.6893 0.642 0.6421 0.5402

GRAPH:
3.0000 2.5000 2.0000 1.5000 1.0000 0.5000 Debt-Equity Ratio 0.0000 -0.5000 -1.0000 -1.5000 -2.0000 Return on Shares=Ln(P1/P0) Retention Ratio=(1-DPR) Dividend Payout Ratio

TIME SERIES REGRESSION RESULT:
REGRESSION ANALYSIS R Adjusted Square Square .020 -.961 R Std. Error of the Estimate .8477950

Model R 1 .140

a. Predictors: (Constant), DIVIDENT PAYOUT , DEBT EQUITY b. Dependent Variable: RETURN ON EQUITY
186

ANOVA Model 1 Regression Residual Total Sum of Squares .029 1.438 1.466 df Mean Square 2 .014 2 .719 4 F .020 Sig. .980

COEFFICIENTS: Unstandardized Coefficients Model 1 (Constant) DEBT EQUITY DIVIDEND PAYOUT a. Dependent Variable: B -.240 .019 -.546 Std. Error 1.622 .570 3.729 .028 -.123 Standardized Coefficients Beta T -.148 .033 -.146 Sig. .896 .977 .879

187

ANALYSIS:
The "R Square 0.020" indicates that 2% of the variability in share return, around the sample mean share return, is associated with debt-equity ratio and dividend payout ratio. The column labeled F gives the overall F-test of H0: ?2 = 0 and ?3 = 0 versus Ha: at least one of ?2 and ?3 does not equal zero. In other words, H0: Dividend Policies does not affect the value of the firm. H1: Dividend Policies does affect the value of the firm. The column labeled significance F has the associated p-value. From the ANOVA table the F-test statistic is 0.020 with p-value of 0.980. The coefficient of debt equity ratio has estimated standard error of 0.570, t-statistic of 0.033 and p-value of 0.977 The coefficient of dividend payout ratio has estimated standard error of 3.729, tstatistic of -0.146 and p-value of 0.879. A simple summary of above output is the fitted line is y = -0.240 +0.019x1 -0.546x2

Inference :
The "R Square of 0.020" indicates that the explanatory power of this regression is very weak. The coefficient of debt equity ratio has p-value of 0.977>0.05. It is therefore concluded that debt equity ratio is statistically insignificant at significance level ? = 0.05. Hence, we can say debt equity ratio does not affect the value of the firm The coefficient of dividend payout ratio has p-value of 0.879> 0.05. It is therefore concluded that dividend payout ratio is statistically insignificant at significance level ? = 0.05.Hence, we can say that dividend payout ratio does not affect the value of the firm From the ANOVA table the p-value (i.e.0.896) > 0.05 we accept the null hypothesis that the regression parameters are zero and conclude that parameters are jointly statistically insignificant at significance level 0.05. Hence, Accept H0: Dividend Policies does not affect the value of the firm. Reject H1: Dividend Policies does affect the value of the firm.

188

189

FINDING: TIME SERIES REGRESSION FINDINGS 1)
APOLLO TYRES pay lower rate of dividend (20% to 30%) and most of the earnings are retained for investment in the business. However, there is no significant relation between dividend and return on shares. Also, debt equity ratio does not affect the value of the firm. Debt-equity ratio and dividend payout ratio are jointly statistically insignificant.
2) ASHOK LEYLAND: Dividend payout ratio and retention ratio is almost

equal. However, there is no significant relation between dividend and return on shares. Also, Debt equity ratio does not affect the value of the firm. Debt-equity ratio and dividend payout ratio are jointly statistically insignificant.
3) MRF TYRES: However, there is no significant relation between dividend and

return on shares. Also, debt equity ratio does not affect the value of the firm. Debtequity ratio and dividend payout ratio are jointly statistically insignificant.
4) TATA MOTORS LTD- Debt equity ratio does not affect the value of the

firm.There is no significant relation between dividend and return on shares.Debt-equity ratio and dividend payout ratio are jointly statistically insignificant.
5) CUMMIN SIND: Debt equity ratio does not affect the value of the firm.There

is no significant relation between dividend and return on shares.Debt-equity ratio and dividend payout ratio are jointly statistically insignificant.
6) ABBAN OFFSHORE: The dividend payout ratio is very less(ranging between

13% to 18%) implies that most of the company’s earnings are retained for the purpose of investing in new projects. However, Debt equity ratio does not affect the value of the firm and there is no significant relation between dividend and return on shares.Debtequity ratio and dividend payout ratio are jointly statistically insignificant.

190

7) GAIL INDIA LTD: Debt equity ratio does not affect the value of the

firm.There is no significant relation between dividend and return on shares .Debt-equity ratio and dividend payout ratio are jointly statistically insignificant.
8)HINDUSTAN PETROLEUM CORPORATION LTD- In the year 2008

retention ratio is increased to 90% and the resultant is that the company had to rely on external financing for meeting up its requirements as the debt equity ratio has also increased in comparison to previous years. Debt equity ratio does not affect the value of the firm.There is no significant relation between dividend and return on shares. Debtequity ratio and dividend payout ratio are jointly statistically insignificant.
9) INDIAN OIL CORPORATION LTD- Debt equity ratio does not affect the

value of the firm.There is no significant relation between dividend and return on shares.Debt-equity ratio and dividend payout ratio are jointly statistically insignificant.
10) OIL AND NATURAL GAS CORPORATION LTD- Debt equity ratio does

not affect the value of the firm.There is no significant relation between dividend and return on shares.Debt-equity ratio and dividend payout ratio are jointly statistically insignificant 11) AUROBINDO PHARMACEUTICALS LTD- The dividend payout ratio is very small (ranging from 7% to 15%) shows that the company retained most of its earning for investing in new opportunities and need not depend on external financing. Thereby the debt equity ratio is also considerably small ranging from 0.45 to 0.93 However, there is no significant relation between dividend and return on shares and also debt equity ratio does not affect the value of the firm. Debt-equity ratio and dividend payout ratio are jointly statistically insignificant. 12)DR REDDY’S LABORATORIES LTD- Retention Ratio is very high(

ranging between 85% to 95%) which implies that the company could finance new ventures internally and was also able to clear all its debts as the debt equity ratio is reduced to zero in the following years. However, debt

191

equity ratio does not affect the value of the firm and there is no significant
relation between dividend and return on shares.Debt-equity ratio and dividend payout ratio are jointly statistically insignificant. 13) GLAXOSMITHKLINE PHARMACEUTICALS LTD- The debt-equity ratio is zero for all the years but however the dividend payout ratio is considerably high. This shows that the company is making considerable earnings. However, Debt-equity ratio and dividend payout ratio are jointly statistically insignificant.
14) IND-SWIFT LABORATORIES LTD- Debt equity ratio is almost 1:1 for all

the years however it does not affect the value of the firm. Dividend payout ratio is very less implies that company has new investment opportunities for which its retaining most of its earnings.There is no significant relation between dividend and return on shares.Debt-equity ratio and dividend payout ratio are jointly statistically insignificant and does not impact return on shares.
15) AJANTA PHARMA: Debt equity ratio does not affect the value of the

firm.There is no significant relation between dividend and return on shares.Debt-equity ratio and dividend payout ratio are jointly statistically insignificant.
16) BRITANIAividend equity ratio has increased from 38.74% to 62.1% in the year 2010-11 while the debt equity ratio has increased form 1% to 96% in the year 2010-11. Debt equity ratio does not affect the value of the firm.There is no significant relation between dividend and return on shares.Debt-equity ratio and dividend payout ratio are jointly statistically insignificant

17) COLGATE PALMOLIVE (INDIA) LTD- Debt equity ratio (0.01) is stable

for all the years. However, debt equity ratio does not affect the value of the firm. It pays a very high rate of dividend (ranging from 85% to 98%) and retained earnings are less. This shows that the investment opportunity in this sector is very less. However, there is no significant relation between dividend and return on shares. Also, debt-equity ratio and dividend payout ratio are jointly statistically insignificant and does not affect return on shares.

192

18)DABUR INDIA LTD- Debt equity ratio does not affect the value of the firm.There is

no significant relation between dividend and return on shares.Debt-equity ratio and dividend payout ratio are jointly statistically insignificant.
19)ITC LTD- Debt equity ratio (0.01) is constant for all the years. Debt equity ratio does

not affect the value of the firm.There is no significant relation between dividend and return on shares.Debt-equity ratio and dividend payout ratio are jointly statistically insignificant.
20)GODREJ CONSUMER PRODUCTS LTD- Debt equity ratio is decreased from in

2006-07 from 1.02 to 0.18

in 2010-11 and even the dividend payout ratio of this

company is very high(70% to 90%). So it implies that the company had to depend on external debt for financing its new projects as it was paying off most of the profits in the form of dividends. However, debt equity ratio does not affect the value of the firm and there is no significant relation between dividend and return on shares.Debt-equity ratio and dividend payout ratio are jointly statistically insignificant.
21) CROMPTON GREAVES LTD- The dividend payout ratio is decreased from 0.2793

to 0.2368 and the debt equity ratio is decreased from 0.41 to 0.01 implies that the company started retaining its earnings to clear off its external debts. However, Debt equity ratio does not affect the value of the firm and there is no significant relation between dividend and return on shares.Debt-equity ratio and dividend payout ratio are jointly statistically insignificant.
22) NEYVELI LIGNITE CORPORATION LTD- Retention ratio is high implies that

the company is retaining its earnings for financing new projects internally. Debt equity ratio does not affect the value of the firm.There is no significant relation between dividend and return on shares.Debt-equity ratio and dividend payout ratio are jointly statistically insignificant.
23) TATA POWER COMPANY LTD- Debt equity ratio does affect the value of the

firm. Dividend payout ratio is kept constant around 30% however there is no significant

193

relation between dividend and return on shares .Debt-equity ratio and dividend payout ratio are jointly statistically significant.
24) TORRENT POWER: Debt equity ratio does not affect the value of the firm.There is

no significant relation between dividend and return on shares.Debt-equity ratio and dividend payout ratio are jointly statistically insignificant

25) BHARAT HEAVY ELECTRICALS LTD- Debt equity ratio is very less and

retention ratio is high shows that the company does not rely on external borrowing for financing its projects. However debt equity ratio does not affect the value of the firm and there is no significant relation between dividend and return on shares. Also, Debt-equity ratio and dividend payout ratio are jointly statistically insignificant.

194

FOR THE YEAR 2006/07
1) AUTOMOBILE SECTOR: Retention ratio is high implies that the companies need not rely on external financing for taking up new projects. Debt equity ratio does not affect the value of the firm.There is no significant relation between dividend and return on shares.Debt-equity ratio and dividend payout ratio are jointly statistically insignificant. 2) FMCG SECTOR- Dividend payout ratio is high (ranging from 50% to 92 %) shows that the investing opportunity in this sector is less. Debt equity ratio does affect the value of the firm and there is no significant relation between dividend and return on shares.Debt-equity ratio and dividend payout ratio are jointly statistically significant. 3) OIL AND GAS SECTOR- Retention ratio is high implies that the companies need not rely on external financing for taking up new projects. Debt equity ratio does not affect the value of the firm.There is no significant relation between dividend and return on shares.Debtequity ratio and dividend payout ratio are jointly statistically insignificant. 4) PHARMACEUTICAL SECTOR- Retention ratio is high(ranging from 73% to 94%) implies that the companies need not rely on external financing for taking up new projects. Debt equity ratio does not affect the value of the firm.There is no significant relation between dividend and return on shares.Debt-equity ratio and dividend payout ratio are jointly statistically insignificant. 5) POWER SECTOR-Retention ratio is high (ranging from 55% to 83%) implies that the companies need not rely on external financing for taking up new projects. Debt equity ratio does not affect the value of the firm.There is no significant relation between dividend and return on shares.Debt-equity ratio and dividend payout ratio are jointly statistically insignificant.

195

FOR THE YEAR 2007/08
1) AUTOMOBILE SECTOR- - Retention ratio is high (ranging from 50% to 94%) implies that the companies need not rely on external financing for taking up new projects. Debt equity ratio does not affect the value of the firm.There is no significant relation between dividend and return on shares.Debt-equity ratio and dividend payout ratio are jointly statistically insignificant. 2) FMCG SECTOR- Debt equity ratio does not affect the value of the firm.There is no significant relation between dividend and return on shares.Debt-equity ratio and dividend payout ratio are jointly statistically insignificant. 3) PHARMACEUTICAL SECTOR- Debt equity ratio does not affect the value of the firm. There is no significant relation between dividend and return on shares. Debt-equity ratio and dividend payout ratio are jointly statistically insignificant. 4) POWER SECTOR- Debt equity ratio does not affect the value of the firm. There is no significant relation between dividend and return on shares. Debt-equity ratio and dividend payout ratio are jointly statistically insignificant.

196

RECOMMENDATIONS
1) As there is no impact of dividend policies on value of firm, investors need not have to consider the dividend policies of companies before investing. During recession only FMCG scripts have positive impact on dividend payout policy of the firm (it is assumed that since the impact of negative trend of an economic set up is very low in case of necessities where in rest of the sectors the dent is very high hence the impact is very high). So it is suggested for the investors to invest in the companies of FMCG Sector during recession period.

2) Automobile sectors shows great movements in the share prices when the exports dominate over domestic sales. Also Indian automobile sector is integrating themselves in the global supply chain of major OEMs. Thus, the investors should purchase scripts of automobile sectors if there is news of increased exports as during that period automobile sector’s dividend payout policies show a positive impact on the value of the firm.

3) Mergers and acquisitions in pharmaceutical industry create a positive impact on dividend payout policies of the firm. So the investors should invest in the companies of this sector when they hear news about major mergers and acquisition in this sector.

4) Investors are concerned only with total returns from investments; they are indifferent to whether it is from capital appreciation or dividend income. Companies should bear this in mind while taking decisions.

5) As debt equity ratio does not have an impact on value of firm, companies can make use of more debt to take advantage of leverage without influencing equity shareholders returns.

197

CONCLUSION
The major decision of financial management is the dividend decision, in the sense that the firm has to choose between distributing the profits to the share holders and plaguing back the profits in to the business. The choice would obviously hinge on the effect of the decision on the maximization of share holders wealth. A firm will be well advised to distribute the net profits as dividend if such a distribution results in maximizing the share holders wealth; if not it would be better to plough back the profits into the business for future investment and growth. On the relationship between the dividend policy and value of the firm different theories have been advanced. One school of thought treats it as relevant and the other as irrelevant. The most popular research result is that of Modigliani and Miller. They prove that dividend is irrelevant. As against this theory, Walter and Gordon through their model explained that dividend is very relevant. Here the study focused on finding out whether dividend affects the value of the firm or not. The results of the study show that the impact of the dividend on the value of the firm is not significant. Out of the 25 sample companies studied only one company showed a significant association between the debt and the return on equity, whereas none of the company showed any evidence of significant relation between dividend and return on shares. Thus it can be observed that in the company wise time series analysis the Return on Equity shares does not have any significant relationship with Debt Equity and dividend Payout. But in case of Cross sectional regression analysis three sectors showed relationship between the variables. However the reasons for the positive impact were the new changes in the sector which indirectly created a positive impact on the dividend payout policies of the firm.

Thus, from the above study we conclude that the dividend irrelevance model holds good.

198

199

BIBLIOGRPAHY
BOOKS
1. Financial Management, Khan M.Y and Jain P.K, Fourth Edition 2004,Tata McGraw Hill Publications. 2. Financial Management Theory and Practice, Chandra Prasanna, Fifth Edition 2000,Tata McGraw Hill Publications. 3. Financial Management, Pandey . I.M, Eight Edition 2000 Vikas Publications Pvt Ltd. 4. Business Research Methods, Cooper R Donald & Schindler S Pamella , Sixth Edition 1999, Tata McGraw Hill Publications. 5. Statistical Methods , Gupta. S.P, 31St Edition (2001),Sultan Chand & Sons.

WEBSITES
a) b) c) d) e) www.bseindia.com www.investopedia.com www.equitymaster.com www.capitalline.com www.moneycontrol.com

DATABASES
a) Capitaline b) Plus Jstor

200



doc_788686915.pdf

 

[mahmmadramiz2711]

gooood