Dividend Policy

Critically examine both(prenominal) the handed-down and Modigliani and Miller theories on how dividend polity affects the value of a company. Your answer should include applicable empirical studies that support separately view and details of early(a) cipher ins that companies should consider when deciding their dividend policy. in that respect argon two views on whether dividend policy affects the commercializeplace value of a company; conventional and M&M. The handed-down says dividends are relevant to market value of a family. It argues investors elect large dividends to smaller dividends because the dividend is positive but future bang-up gains are uncertain this was approve up by Lintner (1956) and Gordon(1959). This leads to the annulus in the hand public debate where shares of companies give higher dividends will be more expensive than shares of companies compensable lower dividends. Hence, dividend policy is seen as a chance upon factor in determine the share charge. The clientele perfume is a theory that a firm will gain a group of investors favouring a particular kind of dividend policy. Thus, firms with antithetical dividend policies would appeal to different kinds of investors or dividend clienteles. For example, firms buckle undering stable and inevitable dividends would attract investors needing stability and income.

Those investors non needing current income would prefer firms that establish subatomic or no dividends. Stocks of utility companies with high dividends are probably to attract item-by-item investors seeking income and institutional investors such(prenominal) as pension plans that pay little or no taxes. An consequence of the clientele effectuate is that a firm whitethorn miscellanea the composition of its cableholders by altering its dividend pattern. Stockholders who are stressed with the naked as a jaybird policy may sell the stock and grease ones palms stock of companies having dividend policies more pursuant(predicate) with their dividend preferences. As a result, the firms stock price may decrease receivable to change pressure. If, however, more new-fashioned investors prefer the new policy...If you compliments to piss a well(p) essay, order it on our website: Ordercustompaper.com

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