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Procedia Economics and Finance
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International Journal of Management Studies
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Cash dividend policy is affected by financial and behavioral factors. Available information in the financial markets reduces the uncertainty and leads to better decisions for the performance and organizational effectiveness. Companies face uncertainty with respect to the world-wide policy, growth, stability, technology and the changes in consumers’ tastes. The determinants and factors that influence the decision to pay dividends include the stakeholders’ perceptions on dividends announcements, the pattern of dividends payments, the opportunities of investments, the effects on share price, the effects of taxes, and the companies’ size.
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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.
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This study reviews one of the unresolved research puzzles in corporate finance; why do companies pay dividends? In this context, a qualitative study dealing with content analysis is carried out based on theoretical and empirical researches. After critically reviewing 407 research articles in dividend policy, 50 empirical studies were taken as the sample based on relevance to the research puzzle. The content analysis provides some significant insights and stylized facts with regard to the corporate dividend policy. However, the research conducted is fundamentally flawed in its design which is based on quantitative approaches in order to elucidate a behavioral explanation. As a result, most of the study findings cannot be relied upon to see consistency with the theories in question. Despite years of theoretical and empirical evidences, the findings show that the dividend puzzle still remains as an unresolved research phenomenon in corporate finance due to lack of unanimity among the researchers over the explanations. This study provides the reader with an all-embracing understanding of the theories and empirical explanations of the dividend puzzle. It is imperative for the researchers to focus on all empirical and theoretical explanations in a single study and test them simultaneously using a triangular approach in order to have a single consensus over this puzzle. Thus, developing a new paradigm or models to deal with the dividend puzzle is suggested and until then, the deduction of various theories in different studies is inconclusive and inconsistent.
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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 .
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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.
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