Bullet Points on factors that determine dividend payout policy
10 views 0 purchase
Course
Corporate Finance
Institution
The University Of Kent (UKC)
Book
Principles of Corporate Finance / Brealey
Comprehensive Notes taken on the factors that determine dividend payout policy written concisely and clearly in response to a past paper exam question.
Solution Manual for Principles of Corporate Finance 14th Edition Author:Richard Brealey, Stewart Myers, Franklin Allen and Alex Edmans, All Chapters[1-34]Latest Version
Solution Manual For Principles of Corporate Finance 14th Edition By Richard Brealey Stewart Myers Franklin Allen and Alex Edmans, Complete Chapters 1-33 2024-2025.
SOLUTIONS MANUAL FOR PRINCIPLES OF CORPORATE FINANCE 14TH EDITION BY RICHARD BREALEY STEWART MYERS FRANKLIN ALLEN AND ALEX EDMANS VERIFIED COMPLETE TEST BANK
All for this textbook (41)
Written for
The University of Kent (UKC)
Unknown
Corporate Finance
All documents for this subject (2)
Seller
Follow
skp21
Content preview
Should a company adopt a high dividend payout, low dividend
payout, or even not pay dividends at all? There are various
factors a company must consider when deciding on its
dividend policy. Identify and discuss those factors.
(try to link these factors together to write about)
Seminar Discussion:
Investors have a lack of information, then they will more
tend to demand a higher dividend (relates to corporate
governance); companies must follow dividend disclosure
requirements (if there is less legislation = investors are not
protected, if this does not exist = investors can’t)
Level of Competition between firms: If firms in a specific
industry are paying shareholders large dividends, then other
companies may wish to do so, to appear that they are
performing well, even if they are not
Level of Competition: Two types: industry peers: Peers
follow large dividends: signals good performance and good
management (translates to smaller peers): Herding Behaviour
Competition in firms across different industries: have
different asset structures, fixed asset companies do not have
liquid assets, large firms pay attention to liquidity compared to
non-fixed assets to firms: so, dividend payouts cannot be
compared
Size of Firms: Smaller Firms wish to retain cash for
reinvestment: Issue of Access to Cash (Large Public Firms have
access to capital markets/FI’s like banks), SME’s do not have
access (growing stage = lack of finance access/wish to retain
cash for positive NPV investments)
Life Cycle of the Firm must be combined with size of
the firm; Companies in growing life cycle stage, wish to
reinvest into opportunities, in long-term shareholders receive
a higher dividend payout.
Dividend Payout vs Company Stability of Operations:
Dividends come from earnings (so this depends on liquidity of
company); firms go bankrupt due to lack of cash to cover
operations/obligations
Economic Growth of the company; if the growth rate
increases, then dividend payout is likely to be higher, but if
the company is still establishing itself and using excess cash
for reinvestment, then less payout to shareholders/ For
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller skp21. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $12.72. You're not tied to anything after your purchase.
