Dividend policy and firm value

The dividend decision is an integral percentage of the firms strategic financing decision. It essentially involves a firms directors deciding how oft of the firms earnings, after interest and taxes (EAIT), should be distributed to the firms average shareowners in bring around for their investment in the firm, and how a great deal should be retained to finance future growth and development. (Sterk and Vandenberg 2004 441-55)The soma of the firms dividend decision, like all pecuniary decisions, should be the maximisation of stockholder wealth. If an optimal dividend polity does outlast then clearly managers should refurbish themselves with its determination; if it does not, then all dividend constitution lead do, as one insurance policy leave alone be equal to another. It should be noted that the dividend decision and dividend policy relate only to everyday share capital. (Asquith and Mullins 2003 77-96)The payment of alternative share dividends is not considered map of a firms dividend policy, as the direct of, or method of calculating, the gustatory sensation dividend is fixed in circulate by the terms and conditions of the commanding preference share offer. erst a dividend policy has been formulated, cathode-ray oscilloscope out the amount and measure, and so forth of dividend payments, it should be followed with stability and control as its guiding principles.

As we shall discuss later, changes to a firms dividend policy can be interpret in various shipway by the financial markets, sometimes with dramatic consequences for the firms share price. You ordain note that the dividend decision is make at the level of the firms destruction to senior managers - at mount up of director level. It is the directors who will blotto down the amount and timing of dividend payments. Under UK company truth the directors cannot be compelled to recommend a dividend and shareholders cannot vote themselves a higher(prenominal) dividend than that recommended by the... If you want to brook a full essay, rescript it on our website: Ordercustompaper.com

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