How accurate is the statement that “The dividend policy of a firm is irrelevant” (original) (raw)
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Dividend Policy: A Review of Theories and Empirical Evidence
The literature on dividend policy has produced a large body of theoretical and empirical research, especially following the publication of the dividend irrelevance hypothesis of Miller and Modigliani (1961). No general consensus has yet emerged after several decades of investigation, and scholars can often disagree even about the same empirical evidence. This paper aims at providing the reader with a comprehensive understanding of dividends and dividend policy by reviewing the main theories and explanations of dividend policy including dividend irrelevance hypothesis of Miller and Modigliani, bird-in-the-hand, tax-preference, clientele effects, signalling, and agency costs hypotheses. The paper also attempts to present the main empirical studies on corporate dividend policy. However, due to the enduring nature and extensive range of the debate about dividend policy which has spawned a vast amount of literature that grows by the day, a full review of all debates is not feasible. The paper reaches at a conclusion that the famous statement of Fisher Black about dividend policy "the harder we look at the dividends picture, the more it seems like a puzzle, with pieces that just do not fit together" (Black, 1976, p. 5) is still valid.
Dividend Policy and Its Impact on Firm Value: A Review of Theories and Empirical Evidence
The Empirical and theoretical research on dividend policy has produced an extensive volume of literature.The research are categorized into two different schools of thought, the first is that dividend policy of a firm has an impact on its value and the second is that dividend policy of the firm has no impact on firm value. Even after several years of research no consensus has emerged, and scholars do not even agree upon with the same empirical evidence. This study provides with a complete understanding of dividends and dividend policy by reviewing the theories and their explanations of dividend policy including both dividend relevance and irrelevance theory of Miller and Modigliani, tax-preference,bird-in-the-hand, clientele effects, signaling and agency costs hypotheses. This study also attempts to present the important empirical studies on corporate dividend policy. However, due to the continuing nature and extensive array of the debate about dividend policy which has hatched a vast amount of literature that grows by the day, a full-fledged review of all debates is not feasible.
International Journal of Economics, Commerce and Management DIVIDEND POLICY AND TAXATION: A REVIEW
For decades, the company's dividend policy has been the subject of intense researches. These researches tried to establish on one side a link between the dividend policy and other factors. From other sides, these studies also aimed to study the interaction between these factors. Such as, the existing link between the dividend policy and taxation. This article presents a literature review of recent and old researches concerning the dividend policy. It studies and analyses the contributions of the diverse currents of thought. Indeed, this paper provides a summary of the work of authors who contribute to the hypothesis of the clientele effect. Résumé Depuis des décennies, la politique de dividendes de l'entreprise a fait l'objet d'intenses recherches. Ces recherches tentent d'établir un lien entre la politique de dividendes et d'autres facteurs et la manière dont ces facteurs interagissent. Par exemple, le lien entre la politique de distribution de dividende et ...
DIVIDEND POLICY DECISIONS: THEORETICAL VIEWS AND RELEVANT ISSUES
This paper provides literature on dividend policy decisions by the corporates in the perspective of shareholder's wealth. Dividend payment is a signal of performance of Firms. If dividend increases, share price will also increases, which leads to the creation of shareholder's wealth. Although, extant literature review have examined issues of dividend policy, still they produced inconclusive results on the dividend policy decisions. Thus a good model that combines dividends with share buybacks is a fairly good compromise due to its advantage of flexibility, tax treatment and intangible gains. Share repurchases leads to better tax treatment than dividend and are more flexible than regular dividends for the company.
Determinants of Dividend Policy
International Journal of Management Studies
The dividend distribution decision is one of the key components of corporate policy and has thus been an issue of interest to investors and researchers alike. Several studies have been attempted, resulting in many different theoretical and empirical explanations for the rationale behind dividend decision. However, the findings have been debatable, leading to no firm conclusion as to what determines the dividend policy. The present research attempts to study the impact of earnings per share, financial leverage, maturity of Indian businesses, Net cash flow for investment, current ratio and total assets on dividend payments. Companies listed on Nifty 50 Index of the National Stock Exchange have been analysed using Correlation and Regression Models to conclude that Earnings per share and Net Cash Flow play a significant role in predicting the Dividend Payment patterns of Indian businesses.
The main purpose of this research paper is to find whether there is a relationship between the dividend policy and stock price. The dividend policy is a wide topic that requires a lot of extensive research and time in order to analyze everything because there are many several different theories, claims, concerns and suggestions regarding the dividend policy and its impact in the stock prices. However, this research will mainly focus in the most three prominent theories know as Bird-in-hands, Irrelevance of dividend policy and Relevance of dividend policy theory. In addition, the literature analysis will reveal how managers control their firm’s stock price value.
The Relationship Between Dividend Policy And Financial Performance: A Review Of Literature
2017
The importance of dividend policy in the current business world of significant agency problems between the principal and agent cannot be over emphasized. Those saddled with the responsibility to oversee the affairs of the organization are confronted with the decisions to improve the firm value; such decisions bother on financing structure, investment in assets and dividend policy. Dividend policies are crucial aspect of organization management and it serves as a mechanism for rewarding owners of a company for their investment. According to Nssim and Ziv (2001) dividend policies provide a guideline for deciding dividend payments to shareholders dividend represents the return accruing to shareholders for investing in an organization in order to acquire stocks (Eriki and Okafor,2002) dividend policy on the other hand deals with the division of profit (Net) between shareholders. Financial performance on the other hand, can be viewed as how well a firm enhances its shareholders’ wealth a...