Dividend Policy: Its Influence on the Value of the Enterprise

Walter, James E.

doi:10.1111/j.1540-6261.1963.tb00724.x

Cited by 117 publications

(80 citation statements)

References 3 publications

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“…Due to uncertainty of future cash flow, investors will often tend to prefer dividends to retained earnings. Though this argument has been widely criticised and has not received strong empirical support, it has been supported by Gordon and Shapiro (1956), Lintner (1962), and Walter (1963). The main assumptions are; that investors have imperfect information about the profitability of a firm.…”

Section: Theories Of Dividend Policymentioning

confidence: 99%

Dividend policy and share price volatility: UK evidence

Hussainey

Mgbame

Chijoke‐Mgbame

2011

The Journal of Risk Finance

178

108

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Forthcoming Journal of Risk Finance 20102 ABSTRACT Purpose: The purpose of this paper is to examine the relationship between dividend policy and share price changes in the UK stock market. Following Baskin (1989) and Allen and Rachim (1996), we use a multiple regression analyses to explore the association between share price changes and both dividend yield and dividend payout ratio. Methodology: Findings:We find a positive relationship between dividend yield and stock price changes and a negative relationship between dividend payout ratio and stock price changes. In addition, our results show that firm's growth rate, debt level, size and earnings explain stock price changes. Practical implications:The study supports the fact that dividend policy is relevant in determining share price changes for a sample of firms listed in the London Stock Exchange. The challenge for managements/accountants is to generally improve the quality of the financial statements (i.e. income statement) to avoid producing wrong information which could lead to wrong decisions by investors. Originality:To the best of our knowledge, this research is the first to show that corporate dividend policy is a key driver of stock prices changes in the UK.

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Section: Theories Of Dividend Policymentioning

confidence: 99%

Dividend policy and share price volatility: UK evidence

Hussainey

Mgbame

Chijoke‐Mgbame

2011

The Journal of Risk Finance

178

108

View full text Add to dashboard Cite

show abstract

“…Aharony and Swary (1980), Kwan (1981), Eades (1982), and Woolridge (1982), have found a significant positive association between announcement of dividend changes and the stock return, using the dividend announcement made in isolation of other firm news report. Gordon (1962 and and Walter (1963) support the dividend relevance doctrine. They suggest that dividend policy and investment policy are inter-linked.…”

Section: Empirical Evidencementioning

confidence: 99%

Effect of Dividend on Stock Price in Emerging Stock Market: A Study on the Listed Private Commercial Banks in DSE

Ali¹,

Chowdhury²

2010

IJEF

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Stock price reactions to the announcement of dividend of the banking industry of Bangladesh are empirically analyzed. This study examines stock price reactions of listed Private Commercial Banks (PCBs) in Bangladesh surrounding 44 days of the dividend announcement dates. The major objective of this study is to identify whether dividend announcement convey any information to the market that results a price reaction for adjusting the dividend announcement information. The empirical part of this study employs a standard event study methodology to analyze the stock price reaction for dividend announcement. Out of 25 listed sample banks in the observation period, market adjusted stock price declines for 11 banks, rises for 6 banks and no changes for 8 banks and statistical pooled t-test also reveals that stock price reaction to dividend announcement are not statistically significant. Finally, dividend announcement does not convey any information due to strong contribution of the insider trading as well as some other influencing factors in the capital market.

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“…The bird-inhand theory was developed by and Walter (1963) in which they concluded that investors always prefer cash in hand rather than a future promise of capital gain, implying higher current dividend payout and smoothening to investors.…”

Section: Theories Of Dividend Policymentioning

confidence: 99%