The main question in dividend-policy literature is whether there exists an optimal dividend policy for shareholders, i.e. whether it is possible to create extra value for the holders through decisions affecting dividend policy. The basis of this article about dividend policy is a 1961 paper by Modigliani and Miller that focuses on the irrelevancy of the dividend policy: in a perfect market, dividend policy is of no interest and does not generate extra value. Since that article was published, it has become a point of reference for the profession: the analysis focuses on how conditions differing from a perfect market affect the dividend policy of a firm, and how the dividend policies applied that take into account these imperfections are priced by the market. The literature presents a vast majority of the factors influencing dividend policy: willingness of investors to take risks and diversify portfolios, tax rates for different investor groups, the investment period, future reinvestment and profitability expectations, the policies of competitors in the same sector and differences between sectors, the cost of alternative financing opportunities, different transaction costs, information situations and information games, and the behavioural finance to describe decisions made in uncertainty. In practice, all seem to affect the dividend policy decided on by firms, the market reception of the decisions, and alterations in those.
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