Empirical relationship between the dividend and investment decision: Do emerging market firms behave differently?

Abstract

This study provides an emerging economy perspective towards the Miller and Modigliani (1961) separation principle. Applying a panel Granger causality test proposed by Hurlin and Venet (2004) to the dividend and investment data of 265 Indian manufacturing firms for 1992-2004, the M-M hypothesis is rejected and evidence found in favour of the joint determination of financing and investment decisions.