The impact of dividend policy on shareholders’ wealth before and after financial meltdown-An empirical analysis on selected pharmaceutical companies in India

Dividend policy (DP) of corporate companies is extensively researched topic in finance however; it remains anarguable issue to decide what factors determine the DP. The objective of this paper is to analyze the dividend distribution of selected pharmaceutical companies and find out the impact of dividend policy (DP) on shareholders’ wealth (SW) of pharmaceutical companies in India before and after financial meltdown. The researcher has taken 13 companies who were registered before 1998 out of 143 companies listed on National Stock Exchange (NSE). In the light of the prior literature, key predictor variables such as Dividend per share (DPS), Market price share (MPS), Price earnings ratio (PER), Earnings per share (EPS), Earnings after revenue and Lagged price earnings ratio (LAGPER) are considered for analyzing the impact of DP on SW. This research paper used statistical tools such as Augmented dickey fuller test, Karl Pearson’s Correlation and Regression. The study found that high correlation exists between the variables generally and higher DP enables increase in the market value of equity per share and vice versa. The results of the statistical tools prove that the Pharmaceuticals companies have significant shift in structure (positive improvement) in respect of SW after global financial meltdown. Shareholders preferred current dividend to future income so, dividend is considered to be an important variable, which determines the SW.