SL

Statement

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6.1. Management’s Perceptions on Various Statements of Dividend Theories

6.1.1

Dividend policy is relevant to market price

6.1.2

Dividends affect the common stock price

6.1.3

Dividends provide signal to investors about company’s performance

6.1.4

Investors are indifferent between returns from dividends and capital gains

6.1.5

A firm should formulate its dividend policy to produce maximum value for its shareholders.

6.1.6

Increasing dividends will reduce shareholders‘ control over management

6.1.7

A firm’s investment, financing and dividend decisions are interrelated

6.1.8

A company develops its dividend policy based on the dividend tax effect on shareholders

6.1.9

A firm’s dividend policy generally affects its cost of capital

6.1.10

Paying dividends forces a firm to seek more external financing

6.1.11

The company takes a dividend decision, despite being under the control of external financiers

6.1.12

Dividends encourage a firm’s manager to act in the interest of the firm’s outside shareholders

6.1.13

Investors generally prefer cash dividends today due to uncertain future price appreciation

6.1.14

A firm should review cash dividend as a residual after funding desired investments from earnings because dividend policy is less important than investment policy

6.1.15

A firm’s expenditures on new capital investments generally affect its dividend policy

6.1.16

Cash dividends are considered as fixed cost of equity

6.1.17

Cash dividends weaken the company’s financial flexibility and liquidity

6.2. Management’s Perceptions on Factors Affecting Corporate Dividend Policy

6.2.1

Stability of earnings affects corporate dividend policy

6.2.2

Patterns of past earnings affects corporate dividend policy

6.2.3

Level of current earnings affects corporate dividend policy

6.2.4

Level of expected future earnings affects corporate dividend policy

6.2.5

Current degree of financial leverage affects corporate dividend policy

6.2.6

Availability of alternative sources of capital affects corporate dividend policy

6.2.7

Expected rate of return on the firm’s assets affects corporate dividend policy

6.2.8

Inflation affects corporate dividend policy

6.2.9

Tax policy of the firm affects corporate dividend policy

6.2.10

Dividend reinvestment plan affects corporate dividend policy

6.2.11

Preference of investors affects corporate dividend policy

6.2.12

Capital market consideration affects corporate dividend policy

6.2.13

Considering the current income of the shareholders affects corporate dividend policy

6.2.14

Constraint of debt contracts on dividend affects corporate dividend policy

6.2.15

Preference to pay dividend instead of undertaking risky investment affects corporate dividend policy

6.2.16

Legal rules and constraints affects corporate dividend policy

6.2.17

Financing considerations such as the cost of external capital affects corporate dividend policy

6.2.18

Investment considerations such as the availability of profitable investment opportunities affects corporate dividend policy

6.2.19

Personal tax of the shareholders affects corporate dividend policy

6.3. Management’s Perception on Patterns of Dividend and Dividend Lifecycle

6.3.1

Dividend changes generally lag behind earnings changes

6.3.2

Dividends generally follow smoother path than earnings

6.3.3

The pattern of cash dividends generally changes over a firm’s lifecycle

6.4. Management’s Perception on Dividend Setting Process

6.4.1

A firm should set a target dividend payout ratio and periodically adjust its current payout toward the target

6.4.2

A company should develop its dividend policy in the light of shareholders’ needs in order to maximize company’s market value

6.4.3

A firm should change dividends based on sustainable shifts in earnings

6.4.4

The market places greater value on stable dividend than stable payout ratio

6.4.5

A firm’s new capital investments generally affect its dividend policy

6.4.6

Dividends can mitigate a low earnings overinvestment problem

6.4.7

A firm sets its dividend decision considering regulatory requirements

6.4.8

A firm sets its dividend decision considering long term financing

6.4.9

A firm should set its dividend decision considering the reduction of tax impact