文獻綜述
 

已經有相當多的研究，旨在確定公司股利政策的決定因素。這種文獻的一個部分都集中在支付股息機構有關的理據。正是基于這個想法，監測公司和它的管理是降低代理沖突和說服市場認為管理者是不是在一個位置，對濫用他們的地位有所幫助。有些股東可能會監控管理休息，但集體行動的結果監控發生的問題太少。因而布魯克（1984）表明，解決這一問題的一種方法是通過增加支付率。假設它要進行計劃的投資，當公司增加其派息，它是被迫去資本市場籌集額外資金。這導致監測公司及其管理層的潛在投資者，從而減少代理問題。Reef（1982）開發了一個模型支撐這一理論，被稱為成本最小化模型。該模型結合與可能通過提高派息比率來控制代理成本控制的交易成本，通過限制派息比率。其上的模型所依賴的中心思想是最佳的支付率，其中這兩種類型的成本的總和是最小化的水平。  
 

Critical review of literature

A selective review of the literature

There has been considerable research that seeks to identify the determinants of corporate Dividend policy. One branch of this literature has focused on an agency-related rationale for paying dividends. It is based on the idea that monitoring of the firm and its management is helpful in reducing agency conflicts and in convincing the market that the managers are not in a position to abuse their position. Some shareholders may be monitoring manage rest, but the problem of collective action results in too little monitoring taking place. Thus Easterbrook (1984) suggests that one way of solving this problem is by increasing the payout ratio. When the firm increases its dividend payment, assuming it wishes to proceed with planned investment, it is forced to go to the capital market to raise additional finance. This induces monitoring by potential investors of the firm and its management, thus reducing agency problems. Reef (1982) develops a model that underpins this theory, called the cost minimization model. The model combines the transaction costs that may be controlled by limiting the payout ratio, with the agency costs that may be controlled by raising the payout ratio. The central idea on which the model rests is that the optimal payout ratio is at the level where the sum of these two types of costs is minimized.

 

Thus Reef's cost minimization model is a regression of the firm target payout ratio on five variables that proxy for agency and transaction costs. Transaction costs in the model are represented by three variables that proxy for the firm's historic and predicted growth rates and risk. High growth and high risk imply greater dependency on external finance due to investment needs, and in order to honor financial obligations, respectively. This, in turn, means that the firm raises external finance more frequently, hence bears higher transaction costs that are associated with raising external finance. The model captures agency costs with two proxies. First, the fraction of the firm owned by insiders is a proxy for insider ownership and is expected to be negatively related to the target payout ratio. As insiders hold more of a firm's equity, the need to monitor their actions is reduced because the incentive for managers to misuse corporate resources falls. Second, the natural logarithm of the number of outside shareholders is a proxy for ownership dispersion. It is expected to be positively related to the target payout ratio because the greater the dispersion, the more severe is the collective action problem of monitoring. Indeed results from an Ordinary Least Squares (OLSQ) cross sectional regression using 1981 data on 1000 US firms, support the theory put forward. Thus the model provides good fit and consequently has attracted the attention of subsequent studies.

 

Minimization model by adding a size variable. An OLSQ cross sectional regression is applied to 1984 data on 957 US firms, and the results provide support for the cost Minimization model and show that firm size is an important explanatory variable. Likewise Schooley and Barney (1994) add a squared measure for insider ownership, arguing that the relationship between dividend and insider ownership may be non-monotonic. Indeed the results from an OLSQ cross sectional regression, using 1980 data on 235 industrial US firms, provide further support for Josef's model in general and for the hypothesis put forward in particular.

 

More support and further contribution to the agency theory of dividend debate, is provided by Moh'd, Perry and Rimbey (1995). These authors introduce a number of modifications to the cost minimization model including industry dummies, institutional holdings and a lagged dependent variable to the RHS of the equation to address possible dynamics. The results of a employing panel data on 341 US firms over 18 years from 1972 to 1989 support the view that the dividend process is of a dynamic nature. The estimated coefficient on the institutional ownership variable is positive and significant, which is in line with tax explanations but contradicts the idea about the monitoring function of institutions.

 

Holder, Langrehr and Hexter (1998) extend the cost minimization model further by stakeholders and by introducing free cash flow as an additional agency variable. The study utilizes panel data on 477 US firms each with 8 years of observations, from 1983 to 1990. The results show a positive relation between the dependent variable and the free cash flow variable, which is consistent with Jensen (1986). Likewise the estimated coefficient on the stakeholder theory variable is shown to be significant and negative as predicted. The estimated coefficients on all the other explanatory variables are also shown to be statistically significant and to bear the hypothesized signs.

 

Hansen, Kumar and Shame (1994) also take a broader view of what constitutes agency costs, and applies a variant of the cost minimization model to the regulated electric utility industry. The prediction is that the agency rationale for dividend should be particularly applicable in the case of regulated firms because agency costs in these firms. Results of cross sectional OLSQ regression for a sample of 81 US utilities and for the period ending 1985 support the cost minimization model and the contribution of regulation to agency conflicts in the firm.

 

Another innovative approach to Reef's cost minimization model is offered in Rao and White (1994) who apply it to 66 private US firms. Using a limited dependent variable,

 

Maximum Likelihood (ML) technique, the study shows that an agency rationale for dividends applies even to private firms that do not participate in the capital market. The authors note that perhaps by paying dividends, private firms can still induce monitoring by bankers, Accountants and tax authorities.

 

To summarize, the agency theory of dividend in general, and the cost minimization model in particular, appear to offer a good description of how dividend policies are determined. The variables in the original cost minimisation model remain significant with consistently signed estimated coefficients, across the other six models reviewed above.

 

Specifically, the constant is, without exception, positively related to the dividend policy decision, while the agency costs variable, the fraction of insider ownership, is consistently negatively related to the firms' dividend policy. The latter is with exception of the study by Scholey and Barney (1994) where the relationship is found to be of a parabolic nature.

 

Similarly, the agency cost variable, ownership dispersion, is consistently positively related to the firm's dividend policy, while the transaction cost variable, risk, is consistently negatively related to the firm's dividend policy regardless of the precise proxy used. The other transaction cost proxies, the growth variables, are also mainly significant and negatively related to the firm's dividend policy, although past growth appears to be a less stable measure than future growth.

 

However, in spite of the apparent goodness of fit of the cost minimization model to US data, its applicability to the Indian case may be challenged. Indeed, Samuel (1996)

 

Hypothesizes that agency problems are less severe in India compared with the US. In contrast, it may be argued that some aspects of the Indian economy imply a particular suitability of the agency theory, and of the cost minimization model, to this economy.

 

Notably, as explained in Hague (1999), many developing countries, including India, established state-centered regimes following their independence. These regimes drew their ideology from socialist and Soviet ideas and were accompanied by highly centralized economic policies, which may increase agency costs in at least three ways as follows.

 

First, such policies may increase managers' agency behavior per se. Indeed Joshi and Little (1997) note that when domestic firms enjoy subsidies or a policy of protectionism, the pressure on managers to become more efficient is relaxed. Second, high state intervention means an extension of agency problems to shareholder-administrator conflicts.

 

Indeed, Hansen, Kumar and Shone (1994) show that the degree of industry regulation enters the dividend policy decision. Third, to the extent that management of the economy is based on social philosophies of protecting the weaker sectors such as employees or poorer customers, this may influence managers to consider the interests of non-equity stakeholders.

 

This all method of stock can also seen that this is only game of risk but if we discussed and see the main game is played by a mathematician who play the whole game behind the market and people are unaware of these things they are only focusing on there on shares and now be more effective due to the ups and downs in the rate of the stock market.

 

This implies that stakeholder theory should be particularly relevant to the Indian case, and, as shown by Holder, Langrehr and Hexter (1998) this may lead to a downward pressure on dividend levels. However, the relevance of stakeholder theory to the Indian case also implies enlargement of agency problems to conflicts of interests among capital holders and other shareholders, increasing the need for shareholders to monitor management behavior.

 

It is thus the case that on the one hand stands the prediction by Samuel (1996) that agency costs should be lower in the Indian business environment. This implies that the agency rationale for dividends should be less applicable in the case of India. To contrast this, the agency rationale for dividends is predicted to become particularly applicable to India, due to the extension of agency conflicts on at least three accounts as explained above. An empirical procedure is the natural way to settle these differences and it is to this task that we now turn.

 

DIVIDEND BEHAVIOR

 

As we have to discussed in this section about the dividend behaviour so it can be discussed, dividend policy remains a source of prolonged public disagreement despite years of theoretical and practical research, one aspect of dividend policy is the link between dividend policy and stock price risk. Risk can be reduced by paying large dividends (Golin 1986) and is a proxy for the later on earnings (Basken, 1990). Many theoretical mechanisms have been given advice that causes dividend policy and payout rolls to vary directly with common stock volatility. These are the effect of duration, effect of rate of return, pricing effect and information effect. Duration effect complies that high dividend rolls give more near the amount of money being transferred. If dividend policy is stably high dividend stocks will have a shorter time. Gordon john Model can be used to suggest so that high-dividend will be less intensive to Rise and fall irregularly in number or amount in discount rates and thus ought to show higher price volatility.

 

Portfolio investments spread risk for foreign investors, and provide an opportunity to share the fruits of growth of developing countries which are expected to grow faster. Investing in emerging markets is expected to provide a better return on investments for pension funds and private investors of the developed countries. For developing countries, foreign portfolio equity investment has different characteristics and implications compared to FDI. Besides supplementing domestic savings, FDI is expected to facilitate transfer of technology, introduce new management and marketing skills, and helps expand host country markets and foreign trade [World Bank, 1997, p. 31]. Portfolio investments supplement foreign exchange availability and domestic savings but are most often not project specific. FPI, are welcomed by developing countries since these are non-debt creating. FPI, if involved in primary issues, provides critical risk capital for new projects. Since FPI takes the form of investment in the secondary stock market, it does not directly contribute to creation of new production capabilities. To enable FPI flows which prefer easy liquidity, multilateral bodies, led by the International Finance Corporation (IFC), have been encouraging establishment and strengthening of stock markets in developing countries as a medium that will enable flow of savings from developed countries to developing countries. FPI, it is expected, could help achieve a higher degree of liquidity at stock markets, increase price-earning (PE) ratios and consequently reduce cost of capital for investment. FPI is also expected to lead to improvement in the functioning of the stock market as foreign portfolio investors are believed to invest on the basis of well-researched strategies and a realistic stock valuation.

The portfolio investors are known to have highly competent analysts and access to a host of information, data and experience of operating in widely differing economic and political environments. Host countries seeking foreign portfolio investments are obliged to improve their trading and delivery systems which would also benefit the local investors. To retain confidence of portfolio investors host countries are expected to follow consistent and business friendly liberal policies. Having access to large funds, foreign portfolio investors can influence developing country capital markets in a significant manner especially in the absence of large domestic investors. Portfolio investments have some macroeconomic implications. While contributing to build-up of foreign exchange reserves, portfolio investments would influence the exchange rate and could lead to artificial appreciation of local currency. This could hurt competitiveness. Portfolio investments are amenable to sudden withdrawals and therefore these have the potential for destabilizing an economy. The volatility of FPI is considerably influenced by global opportunities and flows from one country to another. Though it is sometime argued that FDI and FPI are both equally volatile [Classes et al, 1993], the Mexican and East Asian crises brought into focus the higher risk involved in portfolio investments. The present paper has two objectives. One, to assess the importance of different types of foreign portfolio investments in capital flows to India. And two, to understand the investment behavior of foreign portfolio investors through an analysis of the portfolios of five US-based India specific funds. Such an exercise, it is hoped, would explain the relationship between foreign institutional investments and trading pattern in the Indian stock market better than aggregate level analysis. There has been a significant shift in the character of global capital flows to the developing countries in recent years in that the predominance of private account capital transfer and especially portfolio investments (FPI) increased considerably. In order to attract portfolio investments which prefer liquidity?

Towards the end of 1992, the Government of India allowed FIIs to buy and sell securities directly on the country's stock markets, primarily to attract foreign capital. Concessional rates of tax on capital gains and to some extent the limits on the extent of foreign equity were expected to reduce the volatility and possibly to protect managements from hostile take-overs. From the point of attracting foreign capital, the initial expectations have not been realized. Investment by FIIs directly in the Indian stock market did not bring significantly large amount compared to the GDR issues. GDR issues, unlike FII investments, have the additional advantage of being project specific and thus can contribute directly to productive investments. Though 502 FIIs are reported to be registered with SEBI at the beginning of March, 2000, due to inter linkages among many FIIs, the effective number of entities would be much smaller. These factors render the limits on shareholding in a company by a particular FII serve only a limited purpose. While the country-wise distribution of FIIs suggests the predominant place of USA and UK in FII registrations in India, these inter-linkages make the two countries' dominance more prominent. It has also been noticed that only a few FIIs are active on the Indian stock market. While portfolio investments are known to be volatile, the fact that only a few FIIs and that too mainly from two countries namely USA and UK are interested in the Indian stock market increases its vulnerability to fluctuations. Analysis of the investment exposure of five US-based India specific funds suggested a close resemblance between FII investment profile and trading pattern at the BSE. This finding takes quite further the general understanding that net FII investments influences stock prices in India as it traces the relationship to the sectorial level. The heavy emphasis on computer software, consumer goods in the Indian stock markets seems to have much to do with the process initiated by the FIIs after 1996 as a defensive mechanism.42 Compared to 1996, in 1998, they reduced their exposure in terms of the number of companies and the amount involved. One implication that can be drawn from the similarity between FII investments and trading on the Indian stock market is that the Indian Investors, since they perceive FIIs to trade on the basis of well researched strategies, may have followed the FIIs like a ——herd' and in the process accentuated the selective process introduced by the FIIs. FIIs having a strong presence in the Indian Mutual Funds segment meant that the funds have also

 

Started following a similar investment pattern. Many Mutual Funds floated specific funds for the sectors favored by the FIIs. As a result, the differences have got so accentuated that food and beverages and computer software reached the top in 1998 and accounted for nearly two-fifths of the turnover at BSE during the same year. In line with the changing emphasis of FIIs, by 1999 consumer non-durables receded and computer software took the lead.

 

Now we can also take a look on some agency type reports being played in stock market agency cost argument, as developed by Johnson and Micken (1970). Many authors have pressure the importance of facts content of dividend (Daniel and Thomson, 1989; Bern, Mosey 1989). Diller and Rack (1986) suggested that dividend announces provide the missing cuts of

 

The main thing in the dividend policies is that if one company suggests the rate of its share too low all the investors which want to purchase the shares are the same as the stake holders are willing to do so and that back in the loop. Investors may have greater trust on that reported earnings reflect economic profits and loss statements when announcements are as a companion or escort by sample dividends, they may ere act less to questionable sources of facts and figures and their main theme value may be insulated from irrational development, or behavior.

 

The best discussion be made on this topic can be emphasized as rate and effect of market rate of return effect, as discussed by Godin (1967), is that a firm with low payroll and high dividend interest may tend to be valued more in terms of future investment chances (Daisy, 1965). As a result, its stock price may be more intensive to changing rates of return over rare time intervals.

 

Volatility Index is a major tool of measuring market's expectation of volatility over the next term. Volatility is often described as the "rate and magnitude of changes in prices" and in stock often suggest to as risk. Volatility Index is a measure, of the amount by which an Index is expected to change over the time, in the next term, (calculated as analyzed volatility, denoted in percentage e.g. 40%) based on the order book of the index options. Fama (1992) and Fames and French (1995).People were speechless, many broke.

 

THEORETICAL FRAMEWORK AND MODEL SPECIFICATION

 

Control variables:

 

Share price ups and downs should be relevant to the basic risks ensured in the product markets. There is a impact of stock market's risk on the firm's dividend policy. Volatility Index is a good indicator of the investors' behavior on how markets are expected to be changed in the next term. Usually, during periods of market volatility, market moves steeply up or down And the volatility index tends to rise. As volatility subsides, option prices tend to Decline, which in turn causes volatility index to decline. The information of the less listed firms the market in the stocks of small listed firms, more illiquid, and as a complicated subject to greater price in the ups an down of the stock market. Baskin (1985) suggests that firms with a more deplored body of stakeholders may be more disposed off towards using dividend policy as a device for signaling.#p#分頁標題#e#

 

A value of 2 indicates there appears to be no distortion. Small values of d indicate relevant and supporting error terms are, on average, close in value to one another, or positively corrected .It is also possible that main and important differences in market hall hull, cost effectiveness, restrictions in varying infrastructure etc. This all lead to differences in dividend policy.

 

Variable definition

 

Price volatility (PV)

 

The policy of central planning adopted by the government sought to ensure that the government laid down marked goals to be achieved by the economy thereby establishing a regime of checks and balances. The government also encouraged self sufficiency with the intent to encourage the domestic industries and enterprises, thereby reducing the dependence on foreign trade. Although, initially these policies were extremely successful as the economy did have a steady economic growth and development, they weren't sustained. Square root transformation can be used to show the data can be transformed to a standard deviation. Parkinson (1982) describes the method of closing and opening prices how this method is very easy to the traditional method of summation.

 

Dividend yield Policy (DYP)

 

The variable has been calculated by the summation of all the annual cash which have to pay to common Stake holders. The government approached the World Bank and the IMF for funding. In keeping with their policies there was expectation of devaluation of the rupee. This lead to a lack of confidence in the investors and foreign exchange reserves declined.

 

Earning volatility Of Stock (EV)

 

In order to develop our sense about this variable, the first step is to get an approximate ratio of last year going earnings (before taxes and interest) to intellectual assets. In order to compare the shocks to US markets over countries and the sample period, it is Necessary to impart shocks of the "same magnitude". Since financial markets are volatile, it Would be misleading to compare shocks of the same nominal magnitude across different Periods of time. Thus, the responses of the Asian markets have been tracked to a one standard Deviation shock in the US variable.

 

Payout Ratio (POR)

 

When total dividend exceeds total cumulative profit than payout ratio is set to one. From begin the total cumulative self owned company attributed to low or possibly negatively effect on the net income.

 

Growth in Assets (ASG)

 

The ratio of the change in total assets in a year was taken by the early growth. Then the ratio was averaged over the years.

 

The Benefits of Fundamental Analysis

 

Before deciding whether a stock is worthwhile to purchase, you want to examine all of the known facts about that particular company. This statement brings us to the concept of fundamental analysis, which examines factors such as a, company's earnings per share, income statement, balance sheet, and quality of management. To evaluate the overall environment in which the company operates, you should also examine cultural and political trends, activity within the industry, and the general direction of the economy. Even though we touched upon this area in an earlier chapter, it warrants a more thorough examination here. Companies that are in better financial condition will be more competitive within their industry and will be better capable of exploiting upcoming business opportunities. When evaluating a stock before purchase, successful advisors scrutinize a variety of financial indicators. The following information will help you when working with clients to choose appropriate stock investments: Earnings per share is a popular indicator of a company's financial well-being. This information is determined by dividing a company's net income by the total number of common shares outstanding. A stock's price tends to keep pace with the growth or decline in its earnings. That is one reason why companies that have steady growth in earnings are usually favored by both novice and professional investors alike.

 

Even though no one knows when the next full-fledged bear market will occur, it does not mean we can't prepare for it. Start by figuring out how risky a portfolio is through its current structure. First, add up the total value of all of the investments. Then, group them into three categories: stocks, bonds, and cash. Next, divide the amount in each category by the total value of the portfolio. Very simply, the allocation is 85 percent in stocks, 10 percent in bonds, and 5 percent in cash. During the last prolonged bear market from January 2002 through December 2004, the stock market fell by 41 percent, and this type of portfolio would have shrunk by 34 percent. If the would have dropped to $66,000 in 34 months, would the client have panicked and sold stocks for a loss? This kind of test will confront investors in a bear market environment. If they have to cash out in order to get a decent night's sleep, they need to make some radical changes in their portfolios before these events occur:

 

Use a conservative strategy for money that will be needed within the next three years.

 

For example, if the client needs funds for a vacation or for a child's education, the funds should be put into a bank, money-market fund, or short-term bond fund. Specific sums that will be needed for the short term should not be in the stock market.

 

Consider the client's risk tolerance. Decide if your client could withstand a sudden drop in value without feeling that he or she had to bail out. For example, if a client wanted the total drop in the portfolio not to exceed 30 percent, you should limit stock holdings to 60 percent. Put the remaining 40 percent in bonds or money-market funds.

 

Strive for the best return with the least volatility. A 60/40 mix of stocks to bonds has historically been the proper allocation for most people. For more aggressive investors, consider a 70/30 stock-to-bond mix. For more conservative investors, consider a 50/50 mix of stocks to bonds.

 

Make sure that you have true diversification. It's going to depend on age and financial Objectives. Many Americans today are heavily invested in big U.S. companies, which Performed spectacularly well during most of the 1990s. But your client needs investments for more than one economic climate. Your best protection against an unknown future is a well-diversified portfolio, which even includes foreign securities.

 

Stock investments should include big and small companies in different industries and in different countries. You might want to keep 15 percent to 20 percent of the allocation in international funds. As for bond funds, select one with a short-term maturity (1 to 5 years) and one with an intermediate-term maturity (6 to 12 years). Although longer-term bonds yield more, it is not enough to justify their extra risk should interest rates rise again.

 

Do not choose investments based solely on past returns. Although it is human nature to do so, this approach is a terrible way to structure a portfolio. The danger is that investments with good recent returns all fall into the current ''hot" category; and will usually be recommended by most financial publications. A diversified portfolio is the best way to be sure that you will have money in this year's best-performing investments.

 

Diversification will not prevent you from ever losing money. However, you will lose less than you would with a sole collection of high fliers that all nose-dive together. As we have seen during the year 2000, diversification can be the difference between losing 15 percent and losing 75 percent.

 

Also referred to as the P/E ratio, this indicator tells investors how much they are paying for a company's earning power. Whether the price seems reasonable or extravagant, it Could be based upon severely depressed earnings (a value stock) or upon a track record of consistent profitability (a growth stock). The trick is to identify sound companies that are trading at P/E multiples that are lower than the average for companies in the same industry. Ideally, a good company that is trading at a below-average P/E multiple should rise in value at a greater rate than its industry peers once the market identifies its real value. Book value the difference between a company's assets and its liabilities, divided by the number of shares outstanding, will give you its book value per share. We use this indicator to locate companies whose market price is attractive in relation to their book value. But we must be careful to remember that the asset values on a company's balance sheet do not represent the current market value of its assets. We must try to find companies that have asset values that are understated, rather than overstated. For example, some companies have assets that, because of the rules of accounting, are actually valued on their balance sheets at a fraction of what they are really worth. For this reason, oil companies might be attractive to value investors, because many own vast tracts of oil-rich land that are valued on their balance sheets at much less than they are thought to be worth. Leverage relates to the amount of debt owed by a corporation in relation to the amount of its stockholders' equity Highly leveraged companies have a higher proportion of debt compared to equity Conservative investors tend to prefer companies that have low leverage (those that have relatively low amounts of debt). More aggressive investors often prefer highly leveraged companies. This situation would be advantageous for stockholders when the earnings are high, because once interest is paid on debt; they share in the remainder of the earnings. But because debt interest must be paid before common stockholders are entitled to dividends, high leverage works against stockholders When earnings decline.

 

Return on Equity ROE can be useful, particularly when comparing several companies within one industry. ROE measures the rate of return on investors' capital. To derive ROE, divide earnings per share by book value per share.

 

Favor companies that have above-average, compared to companies that have Below average ROEs in the same industry.

 

Dividend yield a company's dividend expressed as a percentage of the stock's current Market value is known as its dividend yield. Investors who are seeking current income Prefer stocks that have higher dividend yields?as long as the high yield is not caused by a severely depressed and declining stock price. Value investors look for dividend payment histories in order to determine strengths and weaknesses. Companies that have long histories of consistent dividend payments (and preferably, rising dividends) are favored by income investors. Not all investors tend evaluate a company based on these fundamental indicators; so it is advisable to investigate other areas that might have more relevance to them.

 

Conclusion Justification In Relation To Research Questions:

 

In this chapter Present day India enjoys the status of an emerging market. Skilled and managerial labor and technical man-power are such as that they match the best available in the world. Urban middle-high class people has been targeted from the chasing of the market these people did not know about the superior brands and ups and down of the market the status of people very much matter in the stock market. A combination of these factors contributes to India having a distinct and a cutting edge in the globe. India has been termed as the 'stealth' miracle economy of the new millennium. We observe a common pattern of triggered by changes in the market and technological environment. Changes adopts in the form of innovation, avoidance and of regulation.

 

We attempt to find the answer of the following questions:

 

Do the firms listed in Indian Stock?

 

Exchange follows the stable dividend payout policies?

 

Does the dividend yield differ?

 

What are the main factors that determine the dividend payout policies in listed firms of Indian stock exchange?

 

Our results shows that India's listed firms rely more on the current earnings that past dividend to fixed their dividend payments in this way the dividends tends to be more sensitive to current earnings and also on the prior dividends. The variability in the earnings of the firms reflected on the level of dividends. The high variation in the speed of adjustment in the both models Linter's and Fame and Babied by using all the recent techniques like GMM, POOL, FEM, REM and panel regression analysis which are powerful tool for the consistent estimations. The variations in the speed of dividend paying firms are 42.50% to 63.26% which is high. The listed firms Bombay Stock Exchange just like their similar in other markets of developing countries but better than many developing countries, so the listed firms of Karachi stock Exchange is not smooth to pay their dividends. Additionally the target payout ratio is very low 25% to 38.50% with the sample of dividend paying firms. Therefore low target payout ratio and high speed of adjustment clearly shows the trends towards the low smoothing and instability of dividend payout policies in India.#p#分頁標題#e#