Investment Policy Among Saudi Arabia Essay

The American way of business differs from many other countries across the world. Each company has their own set of tactics that they use to close big deals. Businesses from Saudi Arabia, on the other hand, tend to do things a bit differently. They take pride in getting to know the individuals from the other company before even disclosing any information to them. Meetings sometimes take place in less than formal locations such as coffee shops and cafes. The religious and social differences between the United States and Saudi Arabia make it challenging for Americans, unaware of the way of Saudi life, to do business there. They may experience cultural shock or even

When a company decides to pay dividends, it has to be careful on how much it will be given to the shareholders. It is of no use to pay shareholders dividends

George C. Philippatos and William W. Sihler, 'Models of Dividend Policy', Financial Management (Allyn and Bacon), 228-229

Since the emergence of the so-called irrelevance theorem by Miller and Modigliani (1961), many corporations are puzzled about why some firms pay dividends while others do not. They were the first to study the effect of dividend policy on the market value of firms by assuming that there are no market imperfections. Miller and Modigliani (1961) proposed that divided policy chosen by a firm has no significant relationship in as far as the market valuation of the firm is concerned. They went further to explain that; the shareholders wealth remains unchanged irrespective of how the firm distributes it income because the firms’ value is rather determined by their investment policies and the earning power of its assets. They further stated that the opportunity to earn abnormal returns in the market does not exist, that is, owners are entitled to the normal market returns adjusted for risk.

Dividend Policy | -Pay out dividend to shareholders in profitable period | -100% plowback to reinvest in the business |

In practice, dividend policy will be affected by taxes as tax rates for different categories of investors will differ. Also, a firm’s dividend policy is perceived by the financial markets to be a signaling mechanism. A cut back in dividends may signify that the firm perceives tough

In general the three-stage approach allows us to add complexity to the standard dividend discount models by enabling changing growth scenarios throughout the forecasting period: an initial period of higher than normal growth, a transition/consolidation period of declining growth and final a period of stable growth. The main assumptions are that the company on which we conduct the calculation study currently is in extraordinary strong growth phase. The time period with the extraordinary strong growth must be strictly defined and eventually be replaced with the declining growth assumption. Lastly, Capital Expenditures and Depreciation are expected to grow at the same rate as revenues. .

Signaling theory is applied though dividend policy and continue to be widely accepted, but also having inevitably defects. Firstly, changes in the market for dividend not only can be explained using signaling theory, other theories such as the theory of agency costs can also explain. Second, signaling theory cannot effectively explain the difference between the dividend and forecast for different industries and countries. The most importantly, signaling theory does not explain why the company does not use other method in lower cost but same efficiency to transmit information.

Currently Saudi Arabia is one of the leading producers of oil in the world. However, it is losing its foothold on the market. Many countries, like North America, are increasing their oil production and are looking for ways to become less dependent on foreign oil. The rise in competition has caused oil prices to drop. By producing their own oil, countries not only will increase their revenues, but will also reduce their reliance on foreign oil. By lowering their need for foreign oil, a country does not have to worry that their oil supply will be cut off if they go to war.

Iran, Saudi Arabia, United States and Russia have characteristics in common, all these four nations have been facing hostile conditions, the population living in poverty because of government conflicts and ongoing wars against each other. At some point national safety was interrupted by terrorist attacks in the U.S, turning the most powerful nation into safety vulnerability, facing social un-comfortability and security concerns, Russia and the national safety strategy created to protect the national interest. Politics, economy, culture, easiness of doing business and so on are important topics to consider for any multinational decision, over Middle Eastern countries. Iran and Saudi Arabia international investment strategies, political risk, and sociopolitical concerns are some of the topics that bring relevance in the last decade. Oil is in which Iran and Saudi Arabia economy is based. Iran has had faced economic sanctions because of the pretended support of terrorism. Forward in struggling situations, Middle East countries has limited economic relationships with U.S. Members of the government in the Middle East are the concern to increase investment and grow the level of opportunities, delivering strategies to promote investors to set operations in Middle Eastern nations as Iraq and Saudi Arabia. The social effects that terrorism caused is fear and disconcert in government.

The Kingdom of Saudi Arabia, commonly referred to as Saudi Arabia, is located in the Middle East, on the Arabian Peninsula between the Red Sea to the west and the Persian Gulf to the east. Saudi Arabia is bordered by the following countries (clockwise from the north): Jordan, Iraq, Kuwait, Bahrain, Qatar, United Arab Emirates, Oman, and Yemen. In the west, Saudi Arabia is separated from Egypt and Israel by the Gulf of Aqaba. In the east, Saudi Arabia is separated from Iran by the Persian Gulf. Saudi Arabia is the thirteenth-largest country in the world, occupying an area of about 830,000 square miles, an area slightly more than one-fifth the size of the United States (United States Central Intelligence Agency).

Qatar, one of the smallest Arab states, is facing diplomatic isolation when Saudi Arabia, United Arab Emirates (UAE), Yemen, and a host of other Arab nations cut off diplomatic relations and transportation connections. Saudi Arabia has severed all land, sea and air links with Qatar, and the United Arab Emirates has closed its airports and harbors to Qatari flights and shipping. Etihad, Emirates, Gulf Air, and other airlines have ceased all flights in and out of Doha, the Qatari capital. The Qatari diplomats have been given 48 hours to quit and leave their posts. Likewise, Qatari citizens have 14 days to leave Saudi Arabia, Bahrain and the UAE, and those countries also banned their citizens from entering Qatar.

I, student of Post Graduate Diploma in Management from hereby declare that I have completed dissertation on “IMPACT OF DIVIDEND POLICY ON CAPITAL STRUCTURE ” a part of the course requirement.

Kumar (1988) builds a model that explains dividend smoothing - one of the most salient features of dividend policy. Dividends once again signal a firm’s quality (productivity), but, since they are over invested in the firm, managers will try to under invest by underreporting a firms productivity. While there is no fully revealing equilibrium, Kumar shows that firms will tend to cluster around optimal dividend levels. Agency theory suggests that dividends can be used as a means to control a firm’s management. Distributing dividends reduces the free cash

The first objection is related to the fact that this is a totally new approach concerning dividend policy, and nobody can predict what is going to happen. We consider that this may have positive effects on share prices, especially taking in consideration that it will stabilise the market price of the company.