Essay 5 Flashcards
(14 cards)
What is mm proposition on dividend policy
In perfect capital markets where investment policy is fixed and no taxes
Dividend policy irrelevant
Types of dividend
Cash - special and regular
Stock split
Stock dividend
What is firms main source of payout and what is trend for stock buy back
Dividend in maino source of payout but declining whereas stock buybacks on the rise
Stat on dividend payments
2002 83 percent of banks paid out dividends
2012 65 percent of banks paid out dividends
What is main view for dividends for managers
Not to reduced dividends
How do div increase cause increase value
Intrinsic valuations
Behavioural phycology
Natural clientele
Management incentive
How does increasing div decrease value
Income tax greater than capital gains tax
What are signalling effects
Stock buyback good
Increasing dividend good
Decreasing dividend bad
What is happening to signalling effect
Diminishing as buyback is increasing and buyback provides less information
Why cap gains tax good
Deferrable
Why is income tax good for corperations
They only pay tax on 30 % of dividends from investment in other corperations
Us stat on changing income tax
In us changed income tax did not explain Chang Erin dividend policy to stock buyback
What does mm theory state about share holder wealth
Shareholder wealth unaffected
What’s happening to signalling effect
Diminishing
