CORPORATE DIVIDEND POLICY DETERMINATION AND IMPLICATIONS FOR SHAREHOLDER WEALTH
Date
2024
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Shanker Dev Campus
Abstract
This research explores the
relationship between corporate dividend policy and
shareholder wealth in the context of Nepalese commercial banks. Investors analyze a
company's dividend policy, considering factors such as Dividend per Share (DPS),
Earnings per Share (EPS), Dividend Payou t Ratio (DPR), and Price to Earnings (P/E)
ratio, to assess its potential for generating returns and creating shareholder value.
Effective dividend policies, characterized by consistent and attractive dividends, are seen
as a sign of a company's financial stability and growth prospects. Investors are more
likely to invest in companies with a strong track record of dividend payments, as it fosters
trust and attracts capital. Conversely, poor dividend policies can deter investors and
negatively impact shareho lder wealth.
Dividend policy influences investors in several ways. Investors rely on financial
statements, analyst reports, and market data to assess a company's dividend policy and its
implications for shareholder wealth. Strong dividend policies can lead to higher Market
Price per Share (MPS), increased investor interest, and potentially lower required rates of
return. Dividend policy also impacts a company's risk profile. Effective dividend policies,
transparency, and consistent communication can attract risk averse investors. Conversely,
poor dividend policies, lack of transparency, or inconsistent communication can increase
perceived risk and discourage investors.
In conclusion, corporate dividend policy plays a significant role in determining
sharehold er wealth. Investors assess a company's dividend policy to evaluate its ability to
generate returns and manage risk. Positive perceptions of a company's dividend policy
attract investment and enhance shareholder wealth, while negative perceptions can deter
investment and reduce shareholder value. Understanding this connection is crucial for
both investors and companies seeking to maximize shareholder wealth in the Nepalese
banking sector.