Does it matter whether or not firms pay dividends? Why? - Essay Example

Only on StudentShare

Extract of sample
Does it matter whether or not firms pay dividends? Why?

Those companies use that undistributed earnings to reinvest in the business and thereby increase the size of the organisation. Evidently, this practice may adversely affect the financial interests of company shareholders. However, the current market position of the firm particularly influences the implications of non-payment of dividends on the business. This paper will specifically discuss what happens whether or not firms pay dividends. Why some companies pay dividends while some others do not? Undoubtedly, a company tends to pass its earnings to shareholders as remuneration for their investments and hence to retain their interests in the company. When an organisation pays attractive dividends, existing shareholders can significantly gain from their investments. It forces shareholders to stay with the company, and the payment of dividends may also assist the company to attract new potential stakeholders (‘Investor Relations’ 2010). It is clear that dividends paid for a fiscal period is appeared on the consolidated balance sheet prepared at the end of that period. Investors mainly scrutinise current dividend rates so as to decide whether or not to purchase the stocks of the firm. Usually, if investors find that the company offers poor dividend rates, they would not be much interested in investing in that firm. ...Show more


Does it matter whether or not firms pay dividends? Why? Introduction Generally companies pass on a fixed percentage of their net profit to their stakeholders in reward to the investment risk taken by investors. Dividend is the key catalyst that persuades shareholders to purchase stakes of an organisation…
Author : dfeeney
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Does it matter whether or not firms pay dividends? Why?"
with a personal 20% discount.
Grab the best paper

Related Essays

Financial Policies and the Value of the Firm
This essay explores the impact of leverage on growth and thus market valuation; impact of taxation on financial policies and the value of the firm; impact of firm coverage by analyst; impact of financial strategy on financial policy. This paper also takes a glance at the financial flexibility. It is important that firms are financially flexible in response to variables n the environment.
14 pages (3500 words) Literature review
Why might firms with exposure to foreign markets use foreign currency derivatives?
Forex Derivatives- A Tool to Minimise Corporate Risks Introduction As per Rawls and Smithson (1990), risk management is now employed by many multinational corporations to a large extent that outcomes of surveys showed that financial executives graded risk management as one of their foremost objectives.
4 pages (1000 words) Coursework
Make an argument about whether International Organizations matter. Define your criteria for the relevance of IOs and explain how
Examples of international organizations are the World Bank, International Olympic Committee, International Committee of the Red Cross (Barnett & Finnemore, 2011). The international organization affects and is affected by organizations around the world. Introduction: 1.
4 pages (1000 words) Thesis
Main Functional Metrics Employed to Measure ShareHolder Value
True shareholder value is the most desired position of a firm’s equity and debt to the real replacement value of its assets. According to Copeland, et al (1990), “the most significant factor is that the rate of return on invested capital relative to the weighted average cost of capital and the amount the company invests in new capital at this rate to generate growth” (Armitage & Ha, 1995, p.2).
5 pages (1250 words) Essay
Why Do Firms Voluntarily Disclosure Information?
Why do Firms Voluntarily Disclose Information? Since modern corporate governance principles give first priority to shareholder values, today firms tend to disclose their financial as well as other information in annual report. An annual report exhibits current state of affairs of a company and it is prepared to serve the interest of shareholders and stakeholders including banks, employees, and general public better way.
5 pages (1250 words) Essay
Does the mixture of debt and equity in a firm's financial structure matter? Why?
In most situations, the management strives to strike a balance between the level of debt and equity in its capital structure. Equity is usually generated by issuing shares in the stock market where the company is listed. Initially at the time of the inception of the company, the shares are floated for the first time in the stock market which is termed as the Initial Public Offering (IPO).
8 pages (2000 words) Essay
In a wider perspective, dividend policy entails decisions that include whether to distribute cash to the company’s investors through share repurchases or particularly designated dividends other that frequent dividends, and whether to depend on stock other than cash distributions (Allen & Michaely 2002).
5 pages (1250 words) Essay
Does it matter whether or not firms pay dividends? Why?
There are two types of dividend payment modes. These are cash dividend and stock dividend. In case of cash dividend the shareholders receive dividend cheque from the companies of which they hold the shares.
6 pages (1500 words) Essay
Return on Investment : Education Funding
First, I will discuss the factors I considered when enrolling for course in Business Administration. Second, I will address the issue of the expenses related to the course. Finally, the essay will discuss the expected returns after completion of the course in terms of employment opportunity.
3 pages (750 words) Research Paper
The effects of the 2008 financial crisis on the investment in the Gulf area especially on Qatar.
The global financial crisis marked a period of failure of many financial institutions, increase in unemployment and reduction of the capacity to invest. In the Gulf Area, most countries that highly dependent on the oil industry faced a period of reduced investment.
4 pages (1000 words) Essay
Find out how much would it cost
to get a custom paper written by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email