Does Payout Policy Affect Firms’ Performance? Evidence from Textile Industry in India

Abstract

This paper made an inquiry to whether dividend-paying firms are more efficient compared to their non-dividend paying counterparts. To achieve the same, we have employed a non-parametric frontier estimation technique, data envelopment analysis (DEA), on the selected dataset of 73 firms from the textile industry in India. Our result shows that non-dividend-paying firms are 11.17% less efficient in their performance compared to dividend-paying firms. Further analysis indicates that efficient firms have better corporate governance compared to inefficient non-dividend-paying firms. Furthermore, the non-parametric test “ Kruskal-Wallis” reveals that there is a significant difference of about 5.15 % between “high corporate governance dividend paying firms” compared to “low corporate governance non-dividend paying firms”.