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A critique of dividend policy of UK firms

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Freelance Psychology Writer
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Paul B.
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documents in English
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thesis
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10 pages
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  1. Introduction
  2. Research hypothesis
  3. Methodology employed
  4. Quantitative and qualitative approaches for data interpretation
  5. The industry classifications of the London Stock Exchange
  6. Quantitative analysis of financial statements
  7. Sample selection and methodology strategy
  8. Primary and secondary data collection
  9. Limitations of the research
  10. Conclusion
  11. Bibliography

The times are changing for both business managers and investors. Probably the most important task for business managers today is the effective management of the company's portfolio of resources, and identifying, implementing and managing a strategy to leverage these resources to achieve competitive advantage. As part of its strategy in managing company resources, management has to factor in the interests of shareholders and hence, must identify dividend policies that are in lined with the company's strategy in managing its portfolio of resources.The general research question of my MA thesis, which is the main factor in the determination of the different research methodologies appropriate for this paper, is whether the dividend policies of companies' impact the share prices of these companies' common stocks. In so doing, I will be examining these dividend policies.

[...] Moreover, the London Stock Exchange is one of the oldest exchanges in the world that the dividend policies of the companies listed in the burse are fairly established that I believe that a study of the dividend policies and their impact on share prices in a specific period is representative of a bigger period. Quantitative Analysis of Financial Statements As shown by Ackert and Hunter the existing literatures on the relationship of dividends and stock prices specifically on the present discounted value of expected dividends as a stock valuation tool are insufficient (2001). [...]


[...] As such, the null hypothesis is that the dividend policy of a company has no impact on that company's share prices in the stock exchanges while the alternative hypothesis is that the dividend policy of a company has an impact on that company's share prices in the stock exchanges. In line with my main research question: Do the dividend policies of companies' impact the share prices of these companies' common stocks?, and with my methodologies, my hypothesis is that these dividend policies impact the share prices of companies regardless of the dividend preference of an average investor. [...]


[...] These hypotheses are: ?There is no relationship between current and past or future dividends, dividends are not affected by current, past or future earnings, ?Firm-specific factors (size, age and sector) have no impact of on the amount of dividends paid out, ?There is no relationship between current payout ratio and current, past or future growth, ?There is no relationship between the current payout ratio and its past and future, ?Payout ratios do not have an effect on corporate future earnings, corporate leverage has no negative impact on the payout ratio, and payout ratio has no significant impact on the company's future earnings growth? (Al-Twaijry 2007, p. 349). However, the above hypotheses specifically hypotheses numbers 5 and 6 are related to the hypothesis of this research: the dividend policy of a company has no impact on that company's share prices in the stock exchanges. Secondary Data Collection Secondary data such as opinions shall be primarily gathered through an interview. [...]

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