Thesis

The dividend controversy : a study on the impact of dividend policy on the value of the firm

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Awarding institution
  • University of Strathclyde
Date of award
  • 1985
Thesis identifier
  • T7426
Qualification Level
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Department, School or Faculty
Abstract
  • The main purpose of this work is to review and examine in detail the controversial issue of how dividend policy affects the value of the firm and to come up with a conclusion based on evidence in a study on 50 top British companies. In the first three chapters the author forwards illustrations on the basic aspects and areas pertaining to dividend policy and company valuation in an effort to have a clear picture of the focal issue. Discussion of the dividend controversy is in Chapter 4. 'There are three conflicting views and arguments on the subject propagated by three different groups of financial scholars. For simplification, these three groups are divided into conservative, the radical and the middle-of-the-road groups. The conservative group believes in the positive impact of dividend policy where an increase in dividend pay-out will increase the value of the firm. On the contrary, the radical group believes that the dividend policy has a negative impact on the value of the firm and an increase in the payout will reduce the firm's value. The middle-of-the-road group stresses the irrelevance of dividend policy where the value of the firm is independent of the payout policy. Debates on the effect of dividend policy on the value of the firm are likely to continue until such time that there is concrete empirical evidence on the subject and a solid consensus among financial scholars. The author's conclusion in Chapter 6 is aimed only at throwing some light on this controversial issue.
Advisor / supervisor
  • Capstaff, John
Resource Type
DOI

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