INDIA'S DIVIDEND DISCLOSURE DILEMMA: TRANSPARENCY OR MERE COMPLIANCE?

The disclosure rules aimed for balance, but became a mere box-ticking exercise

- PRATIBHA KUMARI & NISHAT ALAM CHOUDHURY

Dividends are more than just a share of profits—they reflect a firm's commitment to shareholders and its approach to governance. Yet, balancing investor payouts with reinvestment for growth has always been a challenge. This debate has gained fresh relevance as India's financial markets undergo a valuation correction amid sluggish economic growth.

While long-term optimism about India's trajectory persists, dividend-seeking investors are left wondering: Are companies truly creating long-term value by retaining earnings, or are they simply masking inefficiencies with self-serving projects?

Unlike some global counterparts, India does not mandate a fixed dividend payout ratio. Listed firms often justify withholding dividends by citing growth opportunities, but it raises concerns about corporate governance and the "agency problem," where managers prioritize interests other than shareholder returns.

According to SAHA, an Istanbul-based corporate governance and credit rating agency, India's corporate governance reputation is subpar—comparable to Brazil, Chile, and China. Ironically, while these nations enforce mandatory or semi-mandatory dividend policies, India's more flexible approach has only fueled investor frustration.