The article analyses inter-dependencies between dividend, capital structure, and cost of capital, factoring the ownership structure of listed firms in India, using 3SLS system approach. The study finds that family firms are dominant with concentrated ownership. Dividend, leverage, and average cost of capital are inter-linked. However, family firms pay lower dividends, consistent with family owners extracting rent from external minority shareholders. Additionally, these firms have high leverage and lower cost of capital, suggesting that family control (reputation) provides intangible value to the firms. Ownership structure plays a critical role in understanding the policy decisions in emerging markets.

Banks in India have been gone through structural changes in the last three decades. The prices that bank charge depend on the competitive levels in the banking sector and the risk the assets and liabilities carry in banks’ balance sheet. The traditional Lerner Index indicates competitive levels. However, this measure does not account for the risk, and this study introduces a risk-adjusted Lerner Index for evaluating competition in Indian banking for the period 1996 to 2016. The market power estimated through the adjusted Lerner Index has been declining since 1996, which indicates an improvement in competitive condition for the overall period. Further, as indicated by risk-adjusted Lerner Index, the Indian banking system exerts much less market power and hence are more competitive contrary to what is suggested by traditional Lerner index.