Dividend Policy: Its Impact on Firm Value
Ronald C. Lease
Harvard Business School Press, 2000 - Business & Economics - 219 pages
This authoritative guide--the only in-depth survey of dividend policy--challenges the belief that corporate executives and financial analysts should dismiss dividend policy as irrelevant to shareholder wealth. Dividend policy does matter, say the authors, as they cite many classic and contemporary examples to show how dividend policy decisions play out in the marketplace. A carefully planned and executed policy is critical to maximizing shareholder wealth. This accessible, practical book covers every aspect of sound dividend planning and implementation. It includes a brief history of the evolution of dividends, statistics on dividends relative to profits and capital investments, their importance as a component of investor total returns, the relationship of dividends to share price, how management makes dividend decisions, and the impact of different tax regulations on dividend policies. The book focuses less on mathematics and more on the intuition of share valuation as a function of dividend policy. While the authors acknowledge the irrelevance of dividend policy in a world with perfect capital markets, they stress how market imperfections such as taxes, imperfect information, and agency issues can alter the dividend irrelevance conclusion. The book devotes special chapters to international dividend policy and to share repurchases as an alternative to dividend payouts. It concludes with the authors' recommendations on how managers should incorporate market imperfections most relevant to their firms in setting dividend policy. Dividend Policy is a must-have resource for all managers, executives, and institutional investors.
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Appendix 2A Common Stock Valuation Model
11 other sections not shown
agency costs announcement effects asset asymmetric information average capital gains cash dividends Chapter common stock repurchases corporate debt holders dend distribution divi dividend announcements dividend changes dividend decisions dividend income dividend increases dividend initiations dividend payments dividend payout dividend per share dividend tax dividend yield coefficient dividends paid Dutch auction earnings effects of dividend equity ex-dividend day ex-dividend period examined excess return financing free cash flows hypothesis idend insider trading investors Journal of Financial Kalay leverage Lintner Litzenberger managed dividend policy market imperfections ment million operating cash flows optimal ownership pay dividends payout ratio percent perfect capital markets portfolio positive NPV pre-tax premium present value profits rate of return relative residual dividend return variations risk risk-adjusted returns sample selling share price share repurchases shareholders studies takeover tax code tax effect tax rate tax reform tender offer tion transaction costs valuation Vermaelen wealth