EFFECT OF DIVIDEND PRACTICES ON SHAREHOLDERS’ WEALTH AND COMPANY PERFORMANCE

Abstract

Dividend practices is a significant part of financial management that influences company’s growth, shareholders wealth, perception of market participants towards the company and reflects upon company performances. This study encompasses a comprehensive analysis and reflection upon the relationship between dividend practices, shareholders wealth and company performances. Impact of dividend practices on shareholders wealth is studied upon through the analysis of existing literature and empirical research. Various dividend policies and theories on dividends are explored and analyzed. Diverse dividend policies, payout ratios, impact of payout on company’s growth, impact of dividend pay-out and earnings retention are scrutinized to understand dynamic interplay between dividend practices and shareholders wealth and company performances. The abstractness of the analysis of shareholders wealth and company performances on the basis of divided policy as the variable factor is also analyzed as different outcomes of data are based not only on dividend practices but various other factors at play. The study has prioritized both quantitative and qualitative overview of dividend practices. For the quantitative approach, the data regarding correlation between dividend practices, stock prices and financial indicators such as Return on equity (ROE) and Earnings per share (EPS) is analyzed. Also, the impact of the distribution of dividend on performance of company is analyzed. Various qualitative approach such as case studies is also presented. Investor’s perception is analyzed on how the influence of dividend impact the stock price movement.