ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Corporate Propensity to Save

savings have been an important source of internal finance for the private corporate sector in India, as a field of study, it has by and large remained neglected. Except for the now considerably dated study by Mazumdar (1959) and a few attempts to infer indirectly the saving propensity of the corporate sector from dividend payout ratios, very few attempts have been made to examine the corporate saving behaviour. The present study is an attempt in that direction. Corporate savings being residually determined as the algebraic difference between profits and dividends an analysis of corporate savings demands that one should examine major influences on corporate profits and dividends separately. This is what we do in the present study. Demand constraint, price situation and wage-costs are taken as major influences on corporate profits while level of profits, dividend policy of firms and availability of external finance are those considered for corporate dividends. Corporate savings are determined residually alter specifying independent functions for corporate profits and dividends. Time series evidence on medium and large public companies is deployed in the regression analysis.

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