The times are changing for both business managers and investors. Probably the most important task for business managers today is the effective management of the company's portfolio of resources, and identifying, implementing and managing a strategy to leverage these resources to achieve competitive advantage. As part of its strategy in managing company resources, management has to factor in the interests of shareholders and hence, must identify dividend policies that are in lined with the company's strategy in managing its portfolio of resources.The general research question of my MA thesis, which is the main factor in the determination of the different research methodologies appropriate for this paper, is whether the dividend policies of companies' impact the share prices of these companies' common stocks. In so doing, I will be examining these dividend policies.
[...] Moreover, the London Stock Exchange is one of the oldest exchanges in the world that the dividend policies of the companies listed in the burse are fairly established that I believe that a study of the dividend policies and their impact on share prices in a specific period is representative of a bigger period. Quantitative Analysis of Financial Statements As shown by Ackert and Hunter the existing literatures on the relationship of dividends and stock prices specifically on the present discounted value of expected dividends as a stock valuation tool are insufficient (2001). [...]
[...] As such, the null hypothesis is that the dividend policy of a company has no impact on that company's share prices in the stock exchanges while the alternative hypothesis is that the dividend policy of a company has an impact on that company's share prices in the stock exchanges. In line with my main research question: Do the dividend policies of companies' impact the share prices of these companies' common stocks?, and with my methodologies, my hypothesis is that these dividend policies impact the share prices of companies regardless of the dividend preference of an average investor. [...]
[...] A list of the sample firms along with their listing codes and broad industry category can be found in Appendix I. The sample selection strategy used in this study is unlike that used by Dickens, Casey and Newman: they identified “firms by industry using Standard Industrial Classification (SIC) codes and eliminate those not incorporated in the U.S. and those firms with missing data” (2003, p. 3). Using the method employed by Casy and Newman would have been impractical for the purposes and objectives of this research impractical because getting the financial statements of the companies included in the sample through this method would have taken so much time since not all companies participated in the London Stock Exchange's free annual report program. [...]
[...] First of all, this is so because the research question is to examine and test the different theories about dividend policy and how it affects the wealth of shareholders and the company itself as well. Secondly, a large number of cases need to be analyzed to draw the statistical trends and the companies' common behaviors within the complex financial and business environment surrounding them. As regards my data analysis, I am going to compile the ratios identified above for each of the companies included in my sample. [...]
[...] This method is a flaw in itself because each industry is unique one industry might be different in the number of companies from another which was clearly shown in the earlier portion of this paper. However, I have decided to use this approach rather than choosing my sample based on their market size or market capitalization because this paper's aim is to identify the relationship of dividend policies and share prices rather than the impact of dividend policies on the London Stock Exchange indices which is based on market capitalization. [...]
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