Strategic Financial Management: Road to sustainability and Corporate efficiency

Abstract

The capital structure design is a crucial job as it involves a complex tradeoff among several considerations like income, risk, flexibility, control, timing of issue and so on. The dividend policy of a firm determines the proportion of earnings paid to shareholders by way of dividends and the proportion of income ploughed back in the firm for reinvestment purposes. If a firm’s capital structure decision making is independent of its dividend payout policy, then a higher dividend payment will entail a greater dependence on external financing. Thus, the dividend policy has a bearing on the choice of financing. The capital structure and dividend payout policy always differ across companies, industries and sectors worldwide. The current study evaluates the impact of capital structure on dividend decisions of select cement companies in India. It was concluded that profitability and risk had significant influence on the capital structure and profitability had influenced the dividend decisions of the Indian cement companies. It was also revealed that there exists a mild correlation between dividend yield ratio and Long term debt to equity ratio and Long term debt to asset ratio.