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6.1. Management’s Perceptions on Various Statements of Dividend Theories |
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6.1.1 | Dividend policy is relevant to market price |
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6.1.2 | Dividends affect the common stock price |
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6.1.3 | Dividends provide signal to investors about company’s performance |
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6.1.4 | Investors are indifferent between returns from dividends and capital gains |
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6.1.5 | A firm should formulate its dividend policy to produce maximum value for its shareholders. |
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6.1.6 | Increasing dividends will reduce shareholders‘ control over management |
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6.1.7 | A firm’s investment, financing and dividend decisions are interrelated |
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6.1.8 | A company develops its dividend policy based on the dividend tax effect on shareholders |
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6.1.9 | A firm’s dividend policy generally affects its cost of capital |
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6.1.10 | Paying dividends forces a firm to seek more external financing |
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6.1.11 | The company takes a dividend decision, despite being under the control of external financiers |
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6.1.12 | Dividends encourage a firm’s manager to act in the interest of the firm’s outside shareholders |
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6.1.13 | Investors generally prefer cash dividends today due to uncertain future price appreciation |
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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 |
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6.1.15 | A firm’s expenditures on new capital investments generally affect its dividend policy |
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6.1.16 | Cash dividends are considered as fixed cost of equity |
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6.1.17 | Cash dividends weaken the company’s financial flexibility and liquidity |
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6.2. Management’s Perceptions on Factors Affecting Corporate Dividend Policy |
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6.2.1 | Stability of earnings affects corporate dividend policy |
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6.2.2 | Patterns of past earnings affects corporate dividend policy |
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6.2.3 | Level of current earnings affects corporate dividend policy |
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6.2.4 | Level of expected future earnings affects corporate dividend policy |
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6.2.5 | Current degree of financial leverage affects corporate dividend policy |
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6.2.6 | Availability of alternative sources of capital affects corporate dividend policy |
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6.2.7 | Expected rate of return on the firm’s assets affects corporate dividend policy |
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6.2.8 | Inflation affects corporate dividend policy |
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6.2.9 | Tax policy of the firm affects corporate dividend policy |
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6.2.10 | Dividend reinvestment plan affects corporate dividend policy |
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6.2.11 | Preference of investors affects corporate dividend policy |
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6.2.12 | Capital market consideration affects corporate dividend policy |
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6.2.13 | Considering the current income of the shareholders affects corporate dividend policy |
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6.2.14 | Constraint of debt contracts on dividend affects corporate dividend policy |
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6.2.15 | Preference to pay dividend instead of undertaking risky investment affects corporate dividend policy |
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6.2.16 | Legal rules and constraints affects corporate dividend policy |
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6.2.17 | Financing considerations such as the cost of external capital affects corporate dividend policy |
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6.2.18 | Investment considerations such as the availability of profitable investment opportunities affects corporate dividend policy |
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6.2.19 | Personal tax of the shareholders affects corporate dividend policy |
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6.3. Management’s Perception on Patterns of Dividend and Dividend Lifecycle |
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6.3.1 | Dividend changes generally lag behind earnings changes |
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6.3.2 | Dividends generally follow smoother path than earnings |
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6.3.3 | The pattern of cash dividends generally changes over a firm’s lifecycle |
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6.4. Management’s Perception on Dividend Setting Process |
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6.4.1 | A firm should set a target dividend payout ratio and periodically adjust its current payout toward the target |
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6.4.2 | A company should develop its dividend policy in the light of shareholders’ needs in order to maximize company’s market value |
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6.4.3 | A firm should change dividends based on sustainable shifts in earnings |
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6.4.4 | The market places greater value on stable dividend than stable payout ratio |
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6.4.5 | A firm’s new capital investments generally affect its dividend policy |
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6.4.6 | Dividends can mitigate a low earnings overinvestment problem |
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6.4.7 | A firm sets its dividend decision considering regulatory requirements |
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6.4.8 | A firm sets its dividend decision considering long term financing |
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6.4.9 | A firm should set its dividend decision considering the reduction of tax impact |
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