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Working Papers | 1993

Dividend Decision: A Study of Managers Perceptions

Bhat Ramesh and Pandey I M

In finance literature several theoretical constructs have been proposed to explain the dividend policy of a company. Several empirical studies have been conducted to test these theories. Very few attempts have been made to understand the perceptions and attitudes of managers about the factors they think are important in determining dividend policy. It is with this objective that the present study purports to present the survey results. The study attempts to answer the following questions: 1. What factors do managers consider important in deciding their companies' dividend policy? 2. Do managers perceive a relationship between their companies' dividend policy and the value of the share? 3. Do managers consider last year's dividend policy relevant in deciding the current dividend policy? 4. Do managers think tax status of their shareholders as an important determinant of dividend policy? 5. Do managers use dividend policy as a signal for indicating the company's future prospects to shareholders? 6. Do managers consider dividend payment merely as a residue? This study used questionnaire to seek answers to above questions. The questionnaire was divided into two parts. Part I focused on determinants which managers consider important (on a seven point scale) in deciding their dividend policy. Part II of the questionnaire was devoted to managers' views (strong disagreement to strong agreement scale) on different issues which have implications for dividend policy. The questionnaire was sent to the Economic Times 250 top companies and was addressed to finance directors of these companies. This study reveals a number of interesting conclusions. First, it is shown that payment of dividend depends on current and expected earnings as well as the pattern of past dividends. This vindicates Lintner's findings in U.S.A. about forty years ago. Similar results are reported by Baker et. al. for U.S.A. companies in 1985. It is also pertinent to note that managers of companies in India would like their companies to continuously maintain payment of dividend. They do not consider liquidity to be a significant consideration in dividend policy. Second, managers consider that there s a positive relationship between payment of dividends and share price. However, it is surprising to find that they do not consider the purpose of dividend policy as maintaining or increasing share price. They strongly believe that companies should strive to maintain an uninterrupted record of dividend payments, and they should avoid making changes in dividend policy that might have to be reversed. Third, respondents in our survey do not seem to fully understand the clientele hypothesis. They, of course, do not deny the existence of high-payout clientele. Managers do consider dividend policy as a signaling device. Fourth, managers seem to prefer payment of dividend even if companies have profitable investment opportunities. Thus, they do not provide any support to dividend residual hypothesis. This is in tone with their perception that the dividend must be paid consistently and continuously.

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Working Papers | 1993

Strengthening Primary Health Care Services: Insights from Qualitative Research in West India

Dileep Mavalankar, Satia J K, and Sharma Bharati

Objectives: To understand reasons for nonuse of Government health services and identify ways to address them. Design and Setting: Indepth interviews of 371 married women of reproductive age were conducted in village of two Primary Health Centres (PHC), of north Gujarat. Five focus group interviews in each of the PHC areas were also conducted. Results and Implications: 1. Acceptance of immunization is high, but needs institutionalization, through community preparation. Women are aware of vaccines(90%), but unaware of diseases, dosage, schedule(69%), therefore do not know the importance of completing vaccine schedule(32%). Vaccines are given at home, but there is substantial dropout in coverage, as women report irregularity of worker(26%), and lack of time(15%). 2. Distributing Iron & Folic Acid tablets may not reduce anemia because, of 60% women served, only 12% consumed for more than 3 months due to side effects and treatment form private sources. 3. There was low demand for antenatal care (46% use) as women do not perceive any benefit unless there is a problem. Delivery care needs improvement, as majority are at home(81%), attended by traditional birth attendants (46%), relatives(18%), private practitioners(24%) and only 3% by ANMs. 4. Sterilization is well accepted but fears remain. Tubectomy was perceived to have least side effects but laparoscopy was preferred as less post operative rest required. Major fears were; laparoscopy causes burning of blood(41%), and vasectomy causes weakness(56%). 5. Low knowledge, demand and use of spacing methods was observed. Knowledge of IUD, condoms and pills was 71%, 63% and 51%. Most women felt that since the natural interval between their children was 2 to 3 yrs, no spacing method was required. Trend was to accept sterilization after the desired family size. 6. People used and preferred private care for major and minor illnesses because private care was thought to be more effective(50%), quick(35%), and more accessible(95). The extension work was restricted to three programs: family planning, immunisation and malaria and the working pattern of the workers does not allow time for counselling and education. The role of primary health care in rural areas and the servering of link between preventive and curative care are discussed.

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Working Papers | 1993

Affine Cost Share Equilibria for Economics with Public Goods

Lahiri Somdeb

In this paper we propose the concept of an affine cost share equilibrium and show that under natural assumptions any optimal allocation corresponds to an affine cost share equilibrium. With linear cost functions and under mild regularity assumptions we show that an optimal allocation is a ratio equilibrium with redistribution. In an appendix to the paper we propose a new proof of the existence of a ratio equilibrium when the preferences of the agents are representable by strictly quasi-concave, continuous and strictly monotonically increasing utility functions.

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Working Papers | 1993

Prospects of Foreign Direct Investments into India in the Nineties

Sebastian Morris

The eighties have witnessed major changes in the phenomenon of foreign direct investments (FDI). There have been major shifts their sources and destinations. Japan became an important source, the US the largest host for inward FDI both of Japanese and Western European based FDI. The important underlying reason has been the declining competitive position of US firms in relation to German and Japanese firms, and the assemetry in growth between the three advanced regions-the USA, Japan and Western Europe. An important development has been the emergence, and now dominance, of services related FDI, although these flows have as yet to affect the LDCs significantly. The host countries within the LDCs too have changed as growth in Latin America has collapsed or declined in the eighties. The fast growing economies of East and South East Asia, have became important hosts, since non resource seeking FDI typically seeks to follow growth. There have been changes too within the Indian economy. The eighties witnessed good growth after a near recessionary period of nearly a decade and a half. It is argued that while the FDI inflow into India is likely to increase in the nineties, such increase is contingent on the maintenance of the industrial growth of the eighties in this decade too. Inflows anywhere near the Chinese level is quite out of question, except in the remote chance that India achieves the 'high speed' growth of China. FDI into India is more likely to take the form of joint-ventures and other so called 'non-equity' forms. As indigenous businesses have gathered strength over the period of sheltered growth in the eighties (and even earlier), FDI entry into India would rarely be without an active Indian collaborator. FDI has had little role to play in the manufactured exports growth from most of the NICs, and their role in India is likely to be even less significant. Yet other foreign firms (like retail chain stores in the West, the Shogo Shosho of Japan) and transnationals too, have, to the great benefit of LDC firms sourced manufactured items from them, the LDC firms having acted as subcontractors or as OEM suppliers. Given the wide diversification of the economy, the low cost of manpower, availability of a wide variety of skills, and large excess capacities, subcontracting and OEM relationship in manufacturing can provide the crucial economies of scale, and steady market to segments of Indian manufacturing which are most competitive, even if at low margins, so that a significant contribution to the extensification of growth can be made.

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Working Papers | 1993

Towards an Orderly Indian Market for Corporate Control

Venkiteswaran N

As the Indian economy is being modernized through dismantling of rigid controls and greater reliance on the interplay market forces, the Indian industry is likely to witness major restructuring through a spate of mergers and acquisitions. This paper begins with a short overview of the benefits and drawbacks of what is referred to a market for corporate control in the light of the developed country experience. It than examines the historical impediments against corporate restructuring through mergers and takeovers in India. The paper is of the view that given the economic compulsions, India is also about to witness significant spurt in mergers and acquisitions in the coming years. In this emerging scenario, importance of regulatory reforms covering a wide area such as competition, investor protection, taxation, corporate governance etc. is underscored so that the Indian market for corporate control is developed along orderly lines.

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Working Papers | 1992

Revitalizing the Cooperative Agriculture Credit Structure: A Case Study of Kheda District

Seetharaman S P, Gurdev Singh, and Srivastava Uma Kant

With a view to understand the current status and working of Cooperative credit Structure and to formulate the strategy they need to follow in the coming decade, Kheda district in Gujarat selected for a case study. On the basis of insights developed, the strategy needed to strengthen the cooperative credit structure is discussed in this paper. Selection I gives a brief review of the changes made for strengthening the cooperatives on the basis of the recommendations of various committees. Section II presents a brief performance review of cooperative credit in Kheda district and Section III the alternative strategies available to strengthen cooperative credit movement. The last is the concluding section. After the comprehensive analysis, the paper makes a radical suggestion of delinking agricultural credit from PACS and entrusting it to the DCCB. PACS may be encouraged to diversify to provide technological inputs with support in storage, processing and marketing to their members. The paper however, adds a word of caution. Merely divesting credit from the primary cooperative may not be an end in itself. Simultaneous efforts in professionalising banking at DCCB level and ability to prepare business plan at the primary level are important. Though not directly relevant, it is equally important that the cooperative law of India, mainly conceived and continuously amended keeping cooperative credit movement in view, needs to be thoroughly rehashed.

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Working Papers | 1992

Indian Economic Forecast November 1992

Rastogi A B

There are confusing signals which are being given by different ministers and their officials about the health of Indian economy. Among all this brouhaha attempt is made to give economic logic to events occurring around us and it is argued that the liberalisation process is very much on track. There is general sluggishness in the economy partly owing to hoarding by traders and slackness in domestic demand for consumer goods. The back of spiraling inflation has been broken and heat of competition is being felt in market place. The governments' credibility is at stake and hence in the coming budget we are not likely to see any hesitation or delay in implementing pre-announced reforms in trade sector and industrial sector.

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Working Papers | 1992

Marketing of Scales in India: Status and Issues

Gurdev Singh and Asokan S R

Seed is a unique agricultural input in the sense it has life, it imbibes productivity potential in it, and it can be multiplied by farmers themselves. In most crops it is the cheapest of all inputs required for increased production. This paper presents brief introduction to the nature of this input, description of existing delivery system identification of issues related to seed marketing in India. The issues are concerned with the primary seed market demand forecast and operational aspects of seed marketing.

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Working Papers | 1992

Finance for Non-Farm Rural Activities

Gurdev Singh

Rural India supplies a number of non-farm products for consumption in local market, regional market or even international market. Their production is normally carried out in the decentralised sector. The raw materials are either locally produced or managed from outside. Marketing and financing are the two important functions recognised for the success of such activities. This paper gives a brief idea about the availability of institutional finance to this sector. It also reflects on the performance of 'Automatic Refinance Facility of NABARD for financing rural non-farm activities and suggests changes in the facility for providing necessary finance for the development of this important sector.

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Working Papers | 1992

Monotonic Solutions to Production Planning Problems

Lahiri Somdeb

A common problem in production planning for a public firm producing n distinct commodities in the same plant and facing a cost constraint, is the choice of the levels of output of the various commodities. This is a classical problem in the theory of publicly regulated firms and assumes significance in the absence of objective guidelines in determining the levels of output. It is to the study of such problems that we focus in this paper.

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