Strategic Financial Management Master Essay Example | Topics and Well Written Essays - 3500 words

Strategic fiscal Management Master - Essay ExampleAnother school of thought believes that dividends ar adverse for the median(a) shareholder as they attract taxes and cause fiscal disadvantages. Last but not the least the triplet group lauds large dividends as positive signal to shareholders that all is well. So where does the modern shareholder mirth stand in relation to dividend policies This is the main issue which I depart review in my story under.This question relates to a consideration of the corporate dividend policy as to whether shareholders should be paid sufficient dividends or whether or not they are making sizeable profits on the stock market. Over the depart half century academics have spoken in great depth over this issue and suggested unlike theoretical frameworks to explain their points of view.(Frankfurter 2002).The problem is that these assertions often lack empirical depth to the criticism and stumble upon self contradictions in an attempt to explain cor porate dividend behaviour.(Frankfurter 2002).Today academic opinion is divided as to whether dividends are lovable to shareholders and will have a positive impact in stock wrongs.(Frankfurter 2002 )Another school of thought contends that prices are negatively correlated with dividend payout levels.(Frankfurter 2002).The third view is that firm dividend policy is irrelevant in stock price valuation. (Frankfurter 2002).My paper will discuss and try to reconcile all these views towards a better theory and brain of this issue. These views are best summed up as being based upon, the tax effect ( Litzenberger and Ramaswamy (1980),)Clientele effects explanations (Elton and Gruber, 1970), business office theory explanations(Easterbrook 1984), Signalling models(John and Williams (1985), and psychological/sociological explanations (Frankfurter and Lane 1992). Frankfurter and Wood (2002) have even gone leading to suggest that none of the dividend theories are unequivocally verified. Acade mics and theorists like (Adam Smith 1937) have recognised that there will always be agency costs related to taking care of shareholder priorities and controlling fretful management staff.(Corporate Governance issues).2- Definitions and views from academicsDividend policy has a large bearing on agency costs and many a(prenominal) academics have recognised this (Fama and Fama) but their belief that payments of large dividends would potentially compensate for the shareholders are often snub during decision making in a company according to John and Kalay 1982 Debt covenants to minimize dividend payments are infallible to prevent bondholder wealth transfers to shareholders .Although potentially substantial in precipitation of agency costs, its dividend policy is not a major source of bondholder wealth expropriation. In firms where dividend payouts are limited by bondholder covenants, dividend payout levels are still below the maximum level allowed by the constraints (Frankfurter