Mandatory dividend disclosure and payout decisions: the role of promoters and business groups

Purpose The current study examines the impact of regulation by the Securities and Exchange Board of India (SEBI), which mandates the disclosure of the Dividend Distribution Policy (DDP) for the top 500 listed companies in India. The objective is to analyze whether mandatory DDP disclosure influences dividend payouts and to explore the role of promoters and business groups in shaping dividend policies. Design/methodology/approach The study utilizes a sample of 14,573 firm-year observations from 2011 to 2021. To assess the causal impact of mandatory DDP disclosure, the difference-in-differences methodology is employed. Findings The analysis reveals a positive association between mandatory DDP disclosure and dividend payouts, aligning with agency theory principles, particularly in the presence of high promoter ownership. Our findings underscore the importance of well-structured mandatory disclosure of DDP for policymakers and regulators, particularly in emerging markets. These policies can positively influence dividend payout ratios, potentially fostering investor confidence and market stability. Furthermore, our study also offers valuable insights for firms in optimizing their dividend strategies. Originality/value While prior research has explored corporate dividend policies, limited studies have examined the role of regulatory disclosure mandates in shaping dividend payouts. This study uniquely highlights the moderating role of promoters and business groups in shaping dividend policies in the Indian context.