Impact of Dividend Policy on Firm Valuation

Running head: IMPACT OF DIVIDEND POLICY ON FIRM VALUATION
Impact of Dividend Policy on Firm Valuation
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1IMPACT OF DIVIDEND POLICY ON FIRM VALUATION
Table of Contents
Statement detailing field of research:.........................................................................................2
Source of secondary data:..........................................................................................................3
Research questions:....................................................................................................................3
Search terms:..............................................................................................................................3
Three peer-review scholarly articles:.........................................................................................3
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2IMPACT OF DIVIDEND POLICY ON FIRM VALUATION
Statement detailing field of research:
The research will be developed with the intent to gain an understanding of the impact
of dividend policy on firm valuation, especially the firms listed in Australian Securities
Exchange. A firm always aims to maximise its value and the wealth of its shareholders. More
precisely, three kinds of financial decisions could affect the firm valuation. These mainly
include financing decisions, investment decisions and dividend decisions. These three
decisions have strong association with each other in series. The investments made by an
organisation ascertain the future gains as well as potential amount of dividend. The dividend
distribution policy ascertains the rate of equity capital within the capital structure of the
organisations, which influences the cost of capital as well. The goal of these inter-associated
decisions is to increase the wealth of the shareholders.
The corporate dividend policy aspect has drawn the attention of management scholars
as well as economists culminating into empirical investigation and theoretical modelling.
Hence, dividend policy is deemed to be one of the most complex financial aspects. The
primary question to be answered here is to find out the cash amounts that the organisations
provide back to their shareholders. In addition, it will ascertain whether the organisations
need to pay their shareholders by share repurchase or dividend payment. In case, the value of
a firm is the function of its dividend payments, dividend policy would have effect on the cost
of capital of the firm. However, the issue here is to find out whether any relationship exists
between corporate performance and dividend policy in the form of profitability, which could
be considered as return on equity (ROE). However, this research will be considering some of
the major players operating in the Australian retail sector listed in ASX.