Oxford brookes college or university
Corporate Financing Concepts
Important literature assessment and exploration of dividend plan
Prepared by: Quang Vinh Pham
Dividend policy, in respect to Baker et ing. (2001), identifies the payment strategy that corporate company directors have to comply with when deciding the size and type of funds allotments for their shareholders as time passes. Therefore , the decision of gross can impact the amount of profits distributed resistant to the amount stored and used for reinvestment. On the other hand, Miller and Modigliani (1961) state that underneath the assumptions of perfect capital markets, the payment of dividend has no impact on the importance of companies in addition to the enhancement of shareholders' prosperity and, appropriately, is unimportant. However , coming from Kozul and Orsag' (2012) perspective, in reality, firms operate on markets with such flaws as income taxes, asymmetric data, agency problems and many more. Therefore, it questions the applicability of Callier and Modigliani' thesis inside the real world and raises a debate of firms' purposes to pay dividends (Denis and Osobov, 2008). After recent changes in dividend policies of two big firms specifically Apple Inc and Dell Inc, the disagreement of for what reason firms modify their dividend policies provides lured even more concerns of finance researchers. In detail, while Apple started to pay gross for the first time since 1995 in March 2012, Dell as well made all their first gross payment in the same year. These situations are considered useful and important by equally markets and analysts. This kind of paper talks about the topic of dividend determinants and firms' tendency to pay dividend.
CRITICAL LITERATURE REVIEW
1 ) Factors affecting dividend plans
1 . 1 . Agency costs
Next Breuer ou al. (2014), agency challenges arise as you factor which may have impact on corporate dividend insurance plan. This is consistent with the company theory which in turn claims which the act of paying payouts can reduce agency issues caused by info asymmetry plus the dispersion of corporate ownership and control between owners and investors (Singhania and Gupta, 2012). One of the details illustrated by simply Al-Malkawi's (2008) is that firms' allocation of money resources induces a decline in the value of inside funds attainable to managers pushing them to acquire external financing from capital market segments. Accordingly, Easterbrook (1984) reveals that around the purpose of making sure the amount of vital funds, managers are encouraged to produce a disclosure of information as well as decreasing company costs due to presence of creditors. Furthermore, Kozul and Orsag' (2012) imply that it is possible for businesses with distribution of ownership to control firm costs by providing a high dividend payment. Likewise, it is exhibited by Al-Malkawi's (2008) that companies which endure a smaller number of firm problems due to higher amounts of managerial control tend to have fewer incentives to work with dividends to minimize the firm costs. Besides, as company problems likewise arise the moment managers make an effort to engage in such activities as buying projects that may be detrimental intended for shareholders but allow them to gain personal reimbursement instead (Jensen and Meckling, 1976), the author points out that dividend payments could alleviate the issue by simply reducing the free income from becoming spent on purchases which produce no comes back. Correspondingly, Breuer et 's. (2014) present that a lowering of free earnings available to managers can be come from raises in dividend payout ultimately causing a decline in overinvestment, thereby; conflicts between managers and shareholders are relieved. Generally, Taleb (2012) conclude that dividend payments enable companies to keep managers' performances below surveillance. In brief, the existence of organization costs comes with an appreciable impact on the dedication of gross policies. 1 ) 2 . Earnings
Via Kozul and Orsag' (2012) perspective, firms often deliver...
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Al-Malkawi, L. N., (2008). Factors Affecting Corporate Dividend Decision: Data from Jordanian Panel Info, International Diary of Organization, Vol. 13, No . 2, pp. 178-195.
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Baker, H. E., Veit, Elizabeth. T. and Powell, G. E., (2001). Factors Influencing Dividend Plan Decisions of Nasdaq Companies, The Economic Review, Volume. 38, pp. 19-38.
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Dell Inc (2009) ANNUAL STATEMENT AND ACCOUNTS 2009 [online]. Dell Inc. Retrieved from: http://i.dell.com/sites/doccontent/corporate/secure/en/Documents/FY09_SECForm10K.pdf [Assessed 14 Nov 2014]
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Dell Inc (2013) ANNUAL STATEMENT AND ACCOUNTS 2013 [online]. Dell Inc. Recovered from: http://i.dell.com/sites/doccontent/corporate/secure/en/Documents/FY13_Form10K_Web.pdf [Assessed 14 November 2014]
Denis, Deb. J
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