Empirically companies payout dividends with high ratio, and they spend much time and energy on deciding how much to pay out as dividends to maximize firm’s value.According to Gordon(1959)’s dividend discount model, firm’s value goes positively with the change of dividend payout, because capital gains are more risky than dividends.(1)But in 1961, Modigliani and Miller… Continue reading discuss the significance of varying cash dividend payments for large firms quoted on stock markets
Category: CeFiMS | SOAS
Explain how dividend policy may be achieved?
The decision of dividend is made by the board of directors. The chronology of dividend is as follows.1. Declaration date : the board of directors passes a resolution to pay dividends.2. Ex-dividend date : The stockholders who trade before this date are entitled to receive the dividend. On the date of ex-dividend, the stock price… Continue reading Explain how dividend policy may be achieved?
What is meant by ‘dividend policy’?
When companies make earnings, they should decide to reinvest in the company or payout to the shareholders out of earnings. Decision process on how much to reinvest and how much to payout is dividend policy. If dividend policy does not affect the change of the company value, dividend policy dose not matter.According to the research… Continue reading What is meant by ‘dividend policy’?
Capital Asset Pricing Model(CAPM)
The core idea of the Capital Asset Pricing Model (CAPM) is that on the assumption of homogeneous expectation on financial markets, a security’s return is related linearly with beta, which is sensitivity of the capital asset to market return of equilibrium.The CAPM is developed by Sharpe W F., Lintner J., Mossin J. respectively. Sharpe published… Continue reading Capital Asset Pricing Model(CAPM)
Discuss why corporate bonds with the same maturity may offer different returns
The main reason why the rate of corporate bonds with the same maturity is different is default risk. The difference between safe bond (government bond) and risky bond is called default premium.Well known institutions like Moody’s, Standard & Poor’s and Fitch show us a classification scheme how much risky the bond is, depending on a… Continue reading Discuss why corporate bonds with the same maturity may offer different returns