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The Effect of Dividend Policy: Investigate of Signaling Theory, Investors and Share Prices - Dissertation Example

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The Effect of Dividend Policy: Investigate of Signaling Theory, Investors and Share Prices

P.8-10 2.2 Investigate of Signaling Theory, Investors and Share Prices………... P.10-23 3. Methodology …………..…………………………….…….………… P.24-27 3.1 Research Hypothesis……………………….………………………… P.27-29 3.2 Descriptive Statistics of the determinants in efficient market……….. P.29 4. Empirical Results…………………………………………………….. P.30 4.1 Sample selection and the price effect………………………………… P.30 4.2 The application of using Regression and OLS Analysis……………… P.31 5. Finding and Conclusion……………………………………………….. P.31-32 5.1 Result of Research…………………………………………………….. P.32 5.2 Challenge and Limitation……………………………………………… P.32 6. References ………………………………….………………………….. P.34-38 7. Appendices ……………………………………………………………….. P.39-40 1. Introduction In recent years, most of European countries are undergoing structural economic problems. The problems are so large which affect every country in the world. Hong Kong is no exception and the stock market, influenced by external factors, has become very volatile. The world's economy is very uncertain in the aftermath of US subprime crisis followed by financial crisis in Europe and the stock markets are fraught with huge risks. Therefore, the investors would like to avoid investing in high risk shares in the stock market. But, they like to maintain a balanced portfolio of investments which also include shares. However, they prefer stable and growth oriented companies, and expect regular return on their investments. The analysis for identifying the stocks for this purpose needs to consider many factors such as the growth prospects, stability and growth in the earnings, market leadership and dividend policy the companies. This paper focuses on dividend policy, one of the important determinants of the share prices and criteria for investment. The perception of dividends and the changes in the dividend policies of the companies constituting as signals to the investors with reference to their investment decisions needs to be analyzed with regard to the circumstances obtained in a particular case which vary case to case. 1.1 Research Background The dividends by the corporate companies are declared at the discretion of the board of directors of the company. The dividend policies of the companies depend upon several factors which include consistency in making profits, the avenues for reinvestment of the profits in the business, potential for growth, the marginal efficiency of the capital and the majority shareholders’ influence on making dividend decisions due to tax or other implications. The dividend policies of the companies or the changes in the dividend policy will affect the different classes of the investors differently based on the individuals’ income levels, age profile, risk taking ability, and tax implications. Therefore, the collective individual decisions will affect the movement of the share prices of the company. The increase in dividends is usually welcome by the market and the markets react negatively to the reduction in the dividends. This paper consists of three objectives to research on the Dividend Policy, the signaling effect of change in the dividend p ...Show more

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Research Proposal The Effect of Dividend Policy: Investigate of Signaling Theory, Investors and Share Prices Table of Contents 1. Introduction……………………….………………………………… P.3 1.1 Research Background…………………………………………………
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