Dividend policy and firm value

The dividend decision is an integral share 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 retort for their investment in the firm, and how lots should be retained to finance future growth and development. (Sterk and Vandenberg 2004 441-55)The practice of the firms dividend decision, like all pecuniary decisions, should be the maximisation of shareowner wealth. If an optimal dividend polity does embody then clearly managers should bear on themselves with its determination; if it does not, then any(prenominal) dividend form _or_ system of government lead do, as one policy testament be equal to another. It should be noted that the dividend decision and dividend policy relate only to workaday share capital. (Asquith and Mullins 2003 77-96)The payment of option share dividends is not considered ruin of a firms dividend policy, as the train of, or method of calculating, the taste sensation dividend is fixed in prelude by the terms and conditions of the arbitrary preference share offer. one time a dividend policy has been formulated, compass out the amount and time, and so on of dividend payments, it should be followed with stability and sustain as its guiding principles.

As we shall discuss later, changes to a firms dividend policy can be interpret in various slipway by the financial markets, sometimes with dramatic consequences for the firms share price. You go out note that the dividend decision is do at the level of the firms attached to senior managers - at carte du jour of director level. It is the directors who will becalm down the amount and timing of dividend payments. Under UK company practice of law the directors cannot be compelled to recommend a dividend and shareholders cannot vote themselves a high dividend than that recommended by the... If you want to puff a full essay, secernate it on our website: Ordercustompaper.com

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