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Determinants of Dividend Policy Assignment

   

Added on  2020-04-15

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Determinants of Dividend Policy: In Muscat Security Market (MSM 30 Index)
Determinants of Dividend Policy Assignment_1

Introduction: Dividend payout policy is regarded as a significant constituent of corporate financialpolicy. Many of the academic researchers has considerably studied the dividend payoutpolicy. In the year 1956, Linter stated that payout policy is principally a function ofearnings stability and earnings. However, this theory was further developed in the year2012, by Myers and Lambrecht; who emphasized that dividend policy is based uponpermanent income. In the year 1961, Modigilani and Miller instigated a debate over a topic i.e. value ofdividends; and this topic is still debatable till now. A question is raised by these authors-Did dividends per se add value? Theses authors, anticipated that a firm’s policy ofinvestment is fixed in perfect market and dividends are not important as investors wouldtreat dividend capital gains and yield as same[ CITATION hub13 \l 1033 ]. Few authors argued over the MM`s assumption that in perfect markets which are freefrom transaction costs, taxes as well as other constraints, value of firm is not affected bythe dividends. Financial sector has played a vital role in Oman`s economic development. In subsequentto oil and gas, financial sector contributes to nation`s GDP at second place. The financialsector`s prominence can also be comprehended from its demonstration in the stockmarket; as in the year 2008, it represented 51% of market capitalization[ CITATIONBat13 \l 1033 ]. Highest liquidity can be seen in the financial sector in context to thetrading of shares in the Muscat Securities Market (MSM). In year 2008, 59% of shareswere traded by MSM listed firms with total profit of 45% in the financial sector. A number of significant institutional and economic features has made Oman aninteresting and unique setting for examining the dividend policy`s stability[ CITATIONRea14 \l 1033 ]. Several reasons are there, which suggests that financial firms of Oman canadopt a smoothing policy in regards to dividends; whereas some other reasons suggestotherwise.
Determinants of Dividend Policy Assignment_2

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