The theories regarding the payment of dividends Finance essay
Dividend policy is the policy that the organization uses to decide how much it will pay out from its profits. to shareholders in dividends. There are two types of dividend policies: managed dividend and residual dividend. Solution. The correct answer is B. Since the ex-dividend date is the first date on which shares trade without, for example, “ex” a dividend, if a buyer purchases shares on the ex-dividend date, the seller of the shares, not the buyer, will. will receive the dividend. b: Describe the chronology of dividend payments, including the, The optimal dividend payout ratio, in such situations, Criticism of Walter's Model. Walter's theory is criticized for the following unrealistic assumptions in the model: No external financing. Walter's assumption that the company has full internal financing through retained earnings is difficult to follow in the real world. Resume. In the modern business world, dividend policy is one of the most controversial issues in corporate finance. The scientific literature on the effect of dividend policy on share prices has grown. Definition of Financial Decision Making. Financial decision making FDM is a strategic procedure for evaluating financial data and selecting different financial options to achieve financial goals. It optimizes resources and ensures the alignment of decisions with organizational objectives through financing, investments and dividend payments. Resume. This chapter presents both the main arguments of dividend policy theories and their empirical evidence. According to Miller and Modigliani (1961), dividend decisions are irrelevant to firm value in a perfect capital market. Nevertheless, there are various market frictions in the real world, such as information asymmetry and agency problems. Dividend Irrelevance Theory: The dividend irrelevance theory is a theory that investors do not concern themselves with a company's dividend policy because they can sell part of their portfolio. The basic principles of the 'pro-dividend' approach can also be sought in the agency theory of Jensen and Meckling, 1976. The payment of cash to shareholders is aimed at limiting the freedom of action of the board, which, because it has fewer resources at its disposal, disposal, should make more effective decisions. Frankfurter and Wood, 2002. Theory of Dividend Policy. Waston and Head, 2007 state that there are two major theories of dividend policy, namely: Dividend Relevance Theory: Lintner 1956 and Gordon 1959 argue that dividend policy affects the value of a company because shareholders prefer dividends to capital gains. The logic of their preference. This study systematically reviews the dividend policy literature, combining quantitative and qualitative techniques. We screened a sample article from the Scopus database. We contribute to the literature by identifying six research streams based on bibliometric co-citation analysis: 1 Dividend payment. The dividend payment decision has negative consequences for Vietnamese companies as measured by accounting performance, but this improves market expectations for companies. Moreover, the newspaper notes that. Therefore, they cannot afford to pay a regular dividend. Investors of such stocks earn their income primarily through capital growth. Essentially, there are many factors that influence dividend policies or decisions. We can refer to the following renowned theories of dividend policy: 1