Paper Topic:

“The test of a good theory is how well it stands up in the real world.

Finance theory concurs with the argument that the investors want to be compensated with higher risks of doing business . Miller asserted that it is the investment policy and not the finance strategy . Having concluded that dividend policy to be irrelevant , he recommend that it should not seriously as an effective management tools . His support is clearer for the use of investment decisions instead

Is the corporate structure theory empirically confirmed Frankfurtera and Wood Jr . appear to agree with Miller as they found irrelevance of the dividend policy . The authors ' purpose in

conducting their research is the determination of method employed , data frequency and sample period on whether these could explain the inconsistency of report and they found that there is no dividend model that is supported consistently hence , dividend policy does not influence stock price . It should be noted that the authors were just trying to verify the work of others and not making their own research

2 .2 What do persons who oppose the theory say on the other side

Not everybody however agree with the claim of Miller . In a by Johnsona , et . al they found relevance of dividend policy when they tested predictions of dividend signalling models by the use of close-end equity which possessed clear policies that guarantee dividends . They found that said policies were aimed to reduce share price under valuation in relation to net asset value (NAV ) and that respondents companies ' use or adopt minimum dividend policies has undergone reduced price discounts or that price are higher than used as compared to others

Other authors also found some validity of the relevance of dividend policy . Ang et . al , who investigated the capital structure and dividend policies of a sample of large publicly traded companies in Indonesia found respondent companies to have good access to...

10 pages

128.0 KB

Free sing-up