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Pacific Business Review International
92
changing environment, any organization wishing to Profile of the Study Sector - Consumer Cyclical Sector in
maintain a competitive position and to satisfy its India
shareholders’ expectation should be engaged in planning Consumer cyclical sector includes industries such as
carefully every time when there is a need for. automotive, housing, entertainment and retail. The sector
The SW (Azhagaiah and Sabaripriya, 2008) is represented can further be divided into durable and non-durable sectors.
by market price of the firm’s common stock, which in turn, is Durable includes physical goods such as hardware or
the function of the firm’s investment, financing and vehicles, while consumer non-durable represents sector viz.,
dividend decision. The modern approach of financial entertainment or hotel services.
management provides a conceptual and analytical The performance of consumer cyclical sector is highly
framework for decision making, which emphasizes the related to the state of the economy. It represents goods and
effective use of resources to create SW. The optimal services that are not considered necessities, but for luxurious
dividend policy (DP) is one that maximizes the firm’s stock purchases. During contractions or recessions, investors
price; this leads to maximization of SW and thereby ensures have less disposable income to spend on consumer cyclical.
rapid economic growth. When the economy is expanding or booming, the sale of
Therefore, the present study is aimed at to study the long-run these goods rise as retail and leisure spending increase.
co-integration between the DP and the SW, and the impact of Consumer cyclical sector comprises textiles, automobiles,
DP on SW before and after an event viz., the global financial tyres, hotel, tourism and others as shown in figure A.
meltdown.
Figure A
Industries of Consumer Cyclical Sector
Source:http://www.investopedia.com
Review of Literature Priya and Nimalathasan (2013) revealed that dividend
payout had a significant impact on SW. Further, earnings per
Researchers have propounded many theories about a firm’s share (EPS), price earnings ratio (P/E) and market price to
value as well as the SW. There has been a substantial book value (MP_BV) had significant correlation with return
literature on the relationship between the DP and the SW and on assets (ROA); the P/E ratio had significant correlation
the impact of DP on SW. Several studies were made in with return on equity (ROE); EPS and the MP_BV were
respect of determinants of DP as well asSW in the developed significantly correlated with ROE of the selected hotels and
as well as in the developing economics like India. restaurants in Sri Lanka.
Vijaya kumar (2011) revealed that the sales and profit after Kumaresan (2014) found that there was a positive
tax of automobile firms had strong relationship with SW. relationship between return on equity, dividend per share
Devaki and Kamalaveni (2012)revealed that there was a and DP and SW of the firms while there was a negative
positive association between lagged dividend, earnings, relationship between retention ratio and SW of the listed
debt-equity ratio, sales size, age of the firm and institutional firms in hotel and travel sectors of Sri Lanka.
shareholding of the Indian corporate hotels. Ganesh et al.
(2013) found that the economic value added, market value Iqbal et al. (2014)found that the DP, firm size and firm
added, cash flow, and market to book value ratio were growth had significant positive impact on SW of selected
healthier in Ashok Leyland than that of the Tata Motors. manufacturing industries from three sectors viz., textile,
sugar and chemical.

The Impact of Dividend Policy on Shareholders' Wealth

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