CORPORATE FINANCE
Table of Content
Impact of Debt and Dividend Policy on Firms’ Value…………………………………………..
Literature review/appraisal……………………………………………………………………….
Theory framework………………………………………………………………………………...
Case Study: Indian Chemical Industry…………………………………………………………
Company Floated In, And Under-Developed Stock Exchange……...………………………
Substantial Diversification Opportunities…………………………………………………………
Uncontrollable Market Fluctuations………………………………………………………………
Limited free float securities……………………………………………………………………….
Cumbersome Tax Regimes………………………………………………………………………
Restricted Trading Culture……………………………………………………………………….
Numerous Hidden Costs…………………………………………………………………………
Conclusion……………………………………………………………………………………….
Impact of Debt and Dividend Policy on Firms’ Value
Debt and dividends are important aspects of the financial position and decisions of a firm. The future of business growth is usually uncertain but in finance nothing is impossible. Companies can calculate the value and future of their company. Early researchers have established the impact of various financial factors in estimating the value of a firm(Honarbakhsh, Birjandi&Birjandi, 2013, p.65). Nevertheless, as the prudent concept laments, the input justifies the output in financial future. Therefore, this research will focus in ascertaining the impact of dividend policy and debts have on financial leveling and the effect on the future value of a firm. Additionally, the study will explicitly discuss company float in and operation in of a country with the underdeveloped stock exchange. In the present scenario, it can be justified that debts and dividend policies are significant financial factors that help determine the level of firm performance and development. Debt is referred to as the financial obligation pay for service rendered or good purchased by a debtor (one who owns the debt) to a debtor (one to whom the debt is owed). On the other hand, dividend policy represents the information that has some impact or effects on the share price of a firm. Dividend policy is used to determine company’s financial policies when paying for their shareholders. Company float can be defined as those shares that are available for investors to trade. It indicates the amount if shares available within a company to be bought and sold(Huang, Ritter & Zhang, 2016, p.25).
Literature review/appraisal
The fundamental principle underlying the impact of debt and dividend policy on the future value of a company can be described through the study of Amidu, (2007, p. 103). In their research, they argued that dividend policy holds a complex relationship in the financial motivation of a firm. Company performance can be substantiated by the nature of coordination between the staff and their managers and given that the dividend policy influences managers it can impact the value of a firm. According to (Valta, 2016, p. 197) the total value of a company is determined by the total stock that the company has accumulated. The capital structure that determines an organization value is composed of debt holders, common equity holders, and preferred equity holders. The total amount of debt that a company. In the opinion of Asif, Rasool, and Kamal(2011, p.1312), increasing a company debt decreases the enterprise value of a firm which determines the total …
