ABSTRACT
Divided policy is an instrument use by the management of a company to respond the behavioural pattern of the owner of shares i.e shareholder. While divide is the portion or reaction of company’s profit that is distributed to the shareholders. There are various method of divided policy depends on the policy of organization this is to say that dividend policy varies from one company to the other. But there is common established fact with regards to the dividend policy. Ti is purely an indoor management affair.
A lot has been said by some renowned theorists authors operators and regulators of the economy as regard to dividend policy and its effect on market value of shares.
Modigliani and Miller model a theorist postulate in their irrelevance theory that dividend has nothing to do with market value of shares based on assumption while of shares based on assumption while Walter’s and Gordon’s models are of relevant theory that a value of shares respond proportionality to the dividend trend. Gordon models goes further by testing his thesis by way of econometric equation to substantiate his argument likewise efficient market hypotheses (E.M.H) shows how the forces of demand and supply dictates the value of shares in relations to dividend policy and the problem encounter in random walk.
Though the research work reveal other factor that is to be considered to determine the value of shares like investment opportunity viability of the company and strength.
This research work was carried out using two companies as a case study with their five years financial statement. This enable us to critically establish the real effect of dividend on market value of shores from one company to the other and econometric equation of Gordon’s model was used to analyze the data by way of matrix
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Dividend policies decision is concerned with the determination of the corporate earnings that is generated through the successful operation of the company in a financial year, which is to distribute among the key players that ensure the realization of the successful outcome of he operation of the organization and the amount of the proportion of this earnings to be retained.
Dividend earnings decision policy is widely considered in the business world as strategic in corporate finance as well as corporate performance and growth. Dividend policy directly influences the behavioural pattern of the investor ie. Shareholders. Because the purchaser of the company i.e shareholder actually buys a dividend expectation; because of the dividend policy decision implication on the behavioural pattern of the shareholder be it positive or negative the corporate world impose the responsibility of this great task of he board room affairs.
Dividend policy decision as a tool in the strategic corporate finance as well corporate performance and growth affect the share price as well as cost of capital. In other words on option dividend policy is the policy that maximizes the wealth of shareholder.
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