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wealth as reflected in the intrinsic value of the firms stock has exist in long-term period.
Moreover predict on the firms growing stream of dividends and investors expected the
dividends of return, which have a model call discounted cash flow. Investor will proper to
understand and aware the largest of proportion in the total return on the portfolio that are
invested (Talla .M, 2006).
Dividend and earning management that literature to identified a connection of a firm and
dividend policy. Earning management is spending on the new project or portfolio to meet
predetermined earnings targets, which occurs either of accrual items or real activities seem like
capital expenditures (Monica .S & Akshay .G, 2012).
2.1 Six dividend policy
Bird-in-the-hand theory
Present about the current of dividend payments receive either dividend retention for reinvestment
in new project or portfolio and retain uncertain return on future. This theory is asserted on paying
higher dividend either of stable dividend payment, seen the dividend payments increase will
effect on the value of firm, while future stock price appreciation is uncertainty. Firm risk on seem
of project invested, which riskiness investment will affect the firm stand on dangers edge (H.
Kent, 2015).
Bird in hand theory; represent the uncertainty information asymmetry in our world. Dividend
pay-out will differently base on revenue. For uncertainty cash flow, as investor extremely prefer
dividend rather than the firm to retain earning. Thus, on increase the value of firm, which
dividend should pay and reduce the rate of return (Monica .S & Akshay .G, 2012).
Taxes and tax clienteles
Investor are more prefer the firm retain in the volume of cash instead of paying dividends, the
reason of tax rate on dividends are always higher than the long-term capital gains. Therefore, the
different in the tax rates will consequence in different tax clientless regarding dividends (H.
Kent, 2015).
In the clienteles effect is present of differences of the value on tax are influence the different in
dividend, therefore will cause of different in group of clienteles. For the example, which indicate
the value on the hand of its, the client or investor are the side supposed to be, which are indicate
on more cash as dividend and another are indicate on the retain of earning by the firms value,
rather than the dividend. Therefore, different behavioural on the firm value will convince
differently clienteles (N. Bhattacharyya, 2016).
the firm are willing to pay dividend to reduce the shareholder conflict and expected on future
decline (H. Kent & Gary E , 2012).
Catering theory
Managers are concern the important of investor depression in decision of dividend policy.
Managers cater to investor demand on paying dividends, when investors are required on this
method. On the opposite, when the investors are required non-dividend paying, managers will
cater to reduce or not pay on dividends. Catering theory can explain dividend initiations better
than dividend omissions, and also conclude that individual firm characteristics should be
integrated with investors sentiment to explain dividend policy (H. Kent, 2015).
Catering theory can mean have accommodated or fulfil current satisfaction of its shareholders.
They cater the demand of shareholder and paying dividend on the investor who are payer on
premium stock and reducing dividends as firm trade at discount when shared of dividend pay (H.
Kent & , Gary E 2012).
References
Hamid Ullah, Asma Fida, & Shafiullah Khan (2012)
The Impact of Ownership Structure on Dividend Policy Evidence from Emerging Markets KSE100 Index Pakistan. International Journal of Business and Social Science
H. Kent Baker Rob Weigand (2015)
Managerial Finance, Corporate dividend policy revisited
Monica Singhania & Akshay Gupta (2012)
Determinants of Corporate Dividend Policy: A Tobit Model Approach
Talla M. Al-Deehani, (2003)
Journal of Economic and Administrative Sciences Determinants of Dividend Policy: The Case of
Kuwait
N. Bhattacharyya (2016)
Managerial Finance, Dividend policy: a review