Assignment on Global Finance
Added on 2021-04-21
7 Pages1911 Words63 Views
Finance
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Running head: GLOBAL FAINANCEGlobal finance Name of the Student:Name of the University:Author Note:
1GLOBAL FAINANCEThe most important and crucial issue that a corporate finance handling faces is nothingbut the decision to fix dividend of the firm, which is associated with the study of the firm’sinvestment decision making and raising capital for the firm. This two vital decision raise fewimportant questions from them the most important are, firstly how much should be the dividendthat the firm is going to pay? Secondly, how the firm’s valuation is being affected by thedividend payout policy? Thirdly, does the firm’s decision on distributing dividend keep up acorrespondence with the decisions they take in case of financing and investing activities? Thequestion that also arises along with the above is the outcome of the changes that are initiated inthe policies regarding dividend which is done taking steady financing as an assumption andconsidering the decisions that are taken regarding investments of the firm. Many researches have been done to successfully handle the answers of the abovequestions but there are still discrepancy regarding the above issues. Lintner (1956) tried to justifythat the firms that works in a developed market keep their dividend payout ratio their target bytaking a helping hand from the earning that they make along with the past dividend. To reach thegoal of the organization various policies are changed at times and to do that the first requirementis to have a stable dividend policy of the firm. Miller and Modigliani (1961) contrary to what theabove theory thinks that the policies regarding dividend is not at all relevant or helpful inmeasuring the value of shares after allowing for the market perfections that are not rational, costof transaction being zero, either certainty or indifferent behavior that they get from the investors.However, Miller and Scholes (1982) argue that the disssion regarding dividend stimulated in ahigher rate by the high taxes which are paid on dividend and also the imperfection that isprevailing in the market.
2GLOBAL FAINANCEAlli, Khan and Ramirez (1993) observed information about the earnings in the near futureand the change that may happen in the share price can be obtained from change in the payoutpolicy. This scenario has a great impact in the decision regarding dividend in the firm. It isquite clear that there is no such proper view point that can be used to give a perfect explanationof the policy regarding dividend of the firm. This study will provide a brief explanation of theseveral companies of India which take large latest sets of data. This study will base on manyexisting literatures with the help of over 15 variables which are financial in nature. Using thefactors it is analyzed and regression is being made using 15 variables which has not been donebefore.The whole paper is divided into parts they are as follows:Recent literature reviewsThe hypothesis that is being tested and the method of doing soThen the results of the study are discussed.Finally the conclusion to the discussion.Literature reviewIn the work of Linther( 1956) may determinants of corporate dividend which are of bothfinancial and non financial in nature are discussed. The work that was developed states a modelthat is basic in nature which states that the companies mainly follow process for adjustingdividend with application of dividend payout ratio. Rozeff (1982) conducted a research on theaffect of the two type of cost mainly known as the agency cost and the other being thetransaction cost with their affect on the dividend decision of the firm. He tries to justify that theequilibrium between the transaction cost and the agency cost can be a reason leading to a
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