Purchase Solution

Dividend Policy

Not what you're looking for?

Ask Custom Question

Hello need help in solving thei problem.

How should investment opportunities influence dividend policy?

Purchase this Solution

Solution Preview

While comparing regulated and unregulated firms, we find some interesting results. On average, a regulated firm is less risky; has a lower growth rate; has much fewer insiders holding its common stock; and has fewer investment opportunities, but pays a higher percentage in dividends. Possible explanations for this include the following: while the issue of dividend policy is far more pervasive, we can understand the determinants of dividend payout for firms. Specifically, those concerned with addressing what factors determine the dividend payout rate. Hence, for the purpose our understanding, a firm's dividend policy is proxied by its dividend payout rate, which is defined as the ratio of dividends per share and earnings per share.

Some other issues also affect the dividend payout rate:
Past growth should be an important determinant of the dividend payout rate. In general, a firm would look at its (recent) past growth rate when deciding how much of its earnings it needs to retain (for growth), and how much to give away as dividends.
The decision to pay dividend and the investment opportunities:
Why do firms pay dividends? If they didn't ...

Purchase this Solution

Free BrainMass Quizzes
Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.

Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.


This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

Lean your Process

This quiz will help you understand the basic concepts of Lean.