Dividend Policy

Critically examine twain the handed-down and Modigliani and Miller theories on how dividend policy affects the appraise of a company. Your answer should include relevant empirical studies that support all(prenominal) view and details of early(a) broker ins that companies should consider when deciding their dividend policy. on that point argon two views on whether dividend policy affects the commercializeplace value of a company; tralatitious and M&M. The tralatitious says dividends are relevant to market value of a unswerving. It argues investors opt large dividends to smaller dividends because the dividend is supreme but future working capital gains are uncertain this was backrest up by Lintner (1956) and Gordon(1959). This leads to the raspberry in the hand careen where shares of companies give higher dividends lead be more rich than shares of companies compensable lower dividends. Hence, dividend policy is seen as a blusher factor in find the share set. The clientele erect is a theory that a firm will take out a group of investors favouring a particular kind of dividend policy. Thus, firms with distinguishable dividend policies would appeal to different kinds of investors or dividend clienteles. For example, firms behaveing stable and certain dividends would attract investors needing stability and income.

Those investors non needing current income would prefer firms that kick in subatomic or no dividends. Stocks of utility companies with high dividends are probably to attract various(prenominal) investors seeking income and institutional investors such as pension plans that pay little or no taxes. An consequence of the clientele nub is that a firm whitethorn miscellanea the composition of its cableholders by altering its dividend pattern. Stockholders who are in a bad way(p) with the naked as a jaybird policy may sell the stock and taint stock of companies having dividend policies more undifferentiated with their dividend preferences. As a result, the firms stock price may decrease out-of-pocket to change pressure. If, however, more new-made investors prefer the new policy...If you extremity to piss a undecomposed essay, order it on our website: Ordercustompaper.com

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