The Importance Of Dividend Policy

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Dividend decision is considered as an integral part of investment decision making to maximize shareholders wealth as suggested by a number of scholars such as Bainbridge (1993), Jensen (2001); Brigham and Ehrhardt (2002); Brealey and Meyer (2003). Considering its importance to the organisation and shareholders, these scholars argued that shareholders return is maximized when company pays out dividend and investors are likely to make some capital gains when the share prices appreciate. Some existing literatures have been carried out in both large and small firms in frontier and advanced markets such as the UK, USA, Germany, Bangladesh, , Malawi, Malaysia and most recently, Zimbabwe and Jordanian using either an evaluative or empirical…show more content…
Zero dividends are widely described as dividends and hence should not be excluded from the research, on that account the results from such studies are regarded as not reliable since the sample size is small.
Taking into account the potential contribution these factors, is a strong motivation to examine the subject in detail because of its great impact on the market value of firm for which investors are greatly concerned. Therefore, this study will attempt to highlight the dividend policy of each industry in the UK and also try to employ the overall concept of dividend policy on share prices that are likely to affect shareholders return. For example (Salih, ALAA.A, 2010; Md. Zahangir Alam and Mohammed Edndad Hossain, 2012, Fawaz Khalid Al-Shawawreh, 2014).
Added to that, previous studies from (Ooi, 2001, Brock et al, 1998; Md. Zahangir Alam and Mohammed Edndad Hossain, 2012), did not examine the relationship between dividend policy and whole market and for each sector. Hence, to make a modest contribution to this literature, an empirical evidence will be provided on the effect of dividend policy and share prices on firms listed on the LSE excluding financial firms because of the specific nature of the firms during the financial crisis period in 2007-2009.
Furthermore, this study will also report results for a whole
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