An aspect of the theory of dividend policy is part of a continuum of control allocations between managers and investors, and hence cross-sectional variations in dividend policy are driven by an underlying factor. Inflation With rising prices due to inflation, the funds generated from depreciation may not be sufficient to replace obsolete equipments and machinery.
A highly profitable company generally pays higher dividends and a company with less or no profits will adopt a conservative dividend policy. Our tutors are highly qualified and hold advanced degrees. However, a firm with less liquidity will choose a conservative dividend policy.
Internal constraints are unique to a firm and include liquid assets, growth prospects, financial requirements, availability of funds, earnings stability and control. The value of the share corresponds to the present value of this stream of dividend payments.
Empirical studies show that firms in developing Countries e. Leverage A company having more leverage in their financial structure and consequently, frequent interest payments will have to decide for a low dividend payout.
Such companies rely on retained earnings as a major source of financing for future growth. Inflation Inflationary environments compel companies to retain major part of their earnings and indulge in lower dividends.
Determinants of Dividend Policy The main determinants of dividend policy of a firm can be classified into: Dividend policy serves as a mechanism for control of a managerial opportunism.
Agrawal and Jayaraman observed that Dividend payments and leverage policy are substitute mechanism for controlling the agency cost of free cash flow hence, improves performance. Each of these perspectives is critical and must be considered simultaneously, to achieve overall efficiency and effectiveness, and to succeed in the long-run.
Dividend payout ratio Dividend payout ratio refers to the percentage share of the net earnings distributed to the shareholders as dividends. Samuels and Wilkes stated that the shareholders are entitled to a revenue stream of dividends.
We have the best tutors in accounts in the industry. Changes in Government Policies There could be the change in the dividend policy of a company due to the imposed changes by the government. However, a company with no internal or external capital requirements should opt for a higher dividend.
If the firm has only limited access to capital markets, it is likely to adopt a low dividend payout ratio. There are no obligations to be adhered to. It is legal to pay a dividend only if the capital is not reduced post payment. Since it is a conservative dividend policy-in the long run, only one half of all profits will be distributed and there will be substantial buildup of retained earnings.
Age of corporation Newly formed companies will have to retain major part of their earnings for further growth and expansion.As salary to Managers and employees is dividend to Shareholders. There are several determinants influencing dividend policy on the banking Industry. A stable dividend policy gives positive signal to shareholders and can be seen as positive on the bank performance.
In order to distribute dividend several factors are considered. Dividend payout ratio refers to the percentage share of the net earnings distributed to the shareholders as dividends.
Dividend policy involves the decision to pay out. The Determinants of Corporate Dividend Policy: An Investigation of Pakistani Banking Industry Sajid Gul (Corresponding Author) on dividend policy while size of the firms found to be negatively correlated.
3. Research Methodology and Variables Data Collection Procedure. payout policy in banking industry of Pakistan. It is very important for a public limited company to determine the influential factors of the dividend payout policy.
Determinants Of Dividend Policy Of Banking Industry. review of dividend theories along with the major empirical evidence for and against the dividend theories, a brief summary of the results of empirical analysis of determinants of dividend policy by country.
Journal of Governance and Regulation / Volume 4, Issue 4,Continued - 3 DETERMINANTS OF CORPORATE DIVIDEND PAYMENT POLICIES: A CASE OF THE BANKING INDUSTRY IN.Download