Summary of Literature Review on Dividends - 2145 Words

Assignment 1 Examined topic or field of the literature review article The article is called Dividend policy: A review of Theories and Empirical Evidence. In this article, the main theories on dividend policy are described and their credibility is evaluated. Connection between the reviewed paper and my research proposal According to my research proposal, the master thesis topic will be â€Å"Comparative analysis of companies’ dividend policy: international perspective†. Therefore, the literature review on dividend policy has a direct connection to my research proposal. There are several factors that explain this connection. First of all, any master thesis has to start with a literature review of existing studies in the studied area†¦show more content†¦Initially, investors received not only the dividends but also their initial investment each time the ship voyage was successful. Eventually, the initial investment was no longer returned after each voyage. Instead, investors would receive a dividend from their initial investment after each successful voyage. At a certain point, this form of financing business activities transferred onto other business activities. Dividend payout played a very important role which was much greater than the role of capital gains income because investors did not fully trust reports (which were not very reliable at that time) and wanted to avoid risk associated with the uncertainty of share prices. These works are not as important as other works because in my master thesis I am planning to analyze the contemporary situation and not the historical perspective, however they are useful for general knowledge and also some of these information should be placed in the master thesis. 4. The works describing and analyzing the key dividend theories These works can be further divided into subgroups, depending on which theory they describe and analyze: Dividend Irrelevance Hypothesis a) Modigliani, Franco, and Merton H. Miller, 1958, The Cost of Capital, Corporation Finance and the Theory of Investment, American Economic Review 48, 261-297. High dividends increase stock valueShow MoreRelatedData Analysis : A Critical Analysis Of The 2008 Financial Crisis1054 Words   |  5 Pagesfuture researchers hence should be seen as the first retail based research on the LSE in relation to the effect of 2008 financial crisis on dividend policy. Hence, these study limitations provide some interesting ideas for further research. In the future, some of the limitations could be solved by examining the impact of the financial crisis on the dividend payment policy on a greater scale. Thus, a suggestion for future research could be to increase the sample size by including more firms, for exampleRead MoreReview on Kaplan and Zingales Research Paper About Relationship Between Investment Cash Flow and Financial Constraint1067 Words   |  5 PagesReview and Evaluation on ‘Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints’ by Kaplan and Zingales (QJE,1997) The research paper written by Steven N. Kaplan and Luigi Zingales as titled above which was published in year 1997 is to test the relationship linking investment-cash flow with financial constraint. In their research, they found that firm with a low level of financial constraint have a tendency to have a high investment-cash flow sensitivity. HoweverRead MoreA Brief Note On The Worlds Largest Medical Technology Company1083 Words   |  5 Pagesbillion in 2013(Y-Charts, 2014). The stock price of Medtronic has increased in value by 13.41% since July of 2013. The forward annual dividend yield is 1.90% and there are 995.76 million shares outstanding (Medtronic, 2013). The dividend payments for Medtronic are currently $.305 cents per share, the dividend payments have been steadily climbing. In 2010 the dividend payment was only $.205 per share. Medtronic’s net profit margin is 20.9% compared to the healthcare industry standard of 16.99% (NYSERead MoreDividends Policy and Common Stock Prices9330 Words   |  38 Pageshow much a company should pay its stockholders, as dividend is one that has been of concern to managers for a long time. The optimal dividend policy of a firm may be defined as the one that increases shareholders wealth by the greatest amount. It is therefore necessary, to understand the nature of the relationship between dividend and value of the firm. It is in the light of this that the study examines the possible effects of a firm’s dividend policy on the market price of its common stock withRead MoreQuestions On Arbitrage Pricing Theory1493 Words   |  6 Pagesreasonable list of factors. First, we want to restrict ourselves to a limited number of systematic factors with considerable ability to explain security returns.† Arbitrage Pricing Theory 1. Introduction †¢ Brief background on the subject from the literature Ever since Ross (1976) proposed the arbitrage pricing theory (APT) as an alternative to the capital pricing model, many economists and investors have applied APT across different markets. Whereas the traditional capital pricing model explainedRead MoreDividend Policy : Review Of Theories2650 Words   |  11 PagesDividend Policy – Review of Theories Introduction Dividend policy refers to the payout policy that a company follows in determining the size and pattern of distributions to shareholders over time. Distribution of cash to shareholders by either payment of dividends and repurchase of shares has been a hotly debated topic amongst scholars. There exists many answers to an optimal dividend policy that satisfies both shareholders and management. With this the company generally faces two operational choicesRead MoreCorporate Finance Practices in Frontier Markets and Malawis Economic Development3233 Words   |  13 Pagesfrontier markets: Empirical evidence companies listed Malawi Stock Exchange Literature review 1. Introduction to the literature review chapter The literature review chapter is designed to provide relevant input from the specialized literature on the topic of corporate frontier markets, with emphasis on four specific elements, namely the capital budgeting practices, the cost capital, the capital structure and the dividend policy. The current section is constructed with in depth research into theRead MoreSamuelson’s Dictum and the Stock Market5657 Words   |  23 Pagesthe dictum that the stock market is ‘‘micro efï ¬ cient’’ but ‘‘macro inefï ¬ cient.’’ That is, the efï ¬ cient markets hypothesis works much better for individual stocks than it does for the aggregate stock market. In this article, we review a strand of evidence in recent literature that supports Samuelson’s dictum and present one simple test, based on a regression and a simple scatter diagram, that vividly illustrates the truth in Samuelson’s dictum for the U.S. stock market data since 1926. (JEL G14) IRead MoreSamuelsons Dictum and the Stock Market5643 Words   |  23 Pagesthe dictum that the stock market is ‘‘micro efï ¬ cient’’ but ‘‘macro inefï ¬ cient.’’ That is, the efï ¬ cient markets hypothesis works much better for individual stocks than it does for the aggregate stock market. In this article, we review a strand of evidence in recent literature that supports Samuelson’s dictum and present one simple test, based on a regression and a simple scatter diagram, that vividly illustrates the truth in Samuelson’s dictum for the U.S. stock market data since 1926. (JEL G14) Read MoreWm Wrigleys Jr Company Case Study2798 Words   |  12 Pagesissuance of $3bn debt. It explores two alternate means of allocation for the funds; pay out a one-time dividend or carry out a share repurchase. Both methods are analyzed in regards to an optimal capital structure and maximizing share holder value (value of the firm). A compilation of historical data and future predictions were used for the basis of this report, and recommendations. Literature Review The following paper will draw on Modigliani and Miller’s (1958) theorem of capital structure to determine