The impact of dividend policy on company value and market performance has been a major focus of research in the financial literature. Several studies have found a positive relationship between consistent dividend payments and company value, indicating that investors perceive dividend payments as a positive signal about a company's stability and future performance.
However, other studies have shown that the effect of dividend policy on company value can vary depending on factors such as company size, debt levels, and business cycle. In addition, there is also evidence that the stock market may respond positively to dividend payment announcements, although the impact may be reduced over time.
3. Implications for Company Management and Investors
The results of this literature study have important implications for company management and investors. For company management, a deep understanding of the factors influencing dividend policy can assist them in making informed dividend decisions, which pay attention to capital needs, company growth, and preferences Company managers need to carefully consider these factors to optimize their dividend policies.
On the other hand, for investors, an understanding of the impact of dividend policy can help them in evaluating the value of their investments and making better investment decisions. Investors need to take into account a company's dividend policy in assessing their investment prospects and managing their portfolios wisely.
4. Benefits of Dividend Policy
- Passive Income: Dividend payments provide passive income to shareholders, appealing to investors looking for regular cash flow.
- Stability and Trust: A consistent dividend policy can increase investor confidence in the company, demonstrating financial health and commitment to shareholder interests
5. Challenges and Risks
- Investment Limitations: Overly aggressive dividend policies can limit a company's ability to reinvest profits in internal growth or new investment opportunities.
- Perception of Performance: If the company is unable to maintain consistent dividend payments, this can be considered a negative signal to the company's performance.
6. Strategic Adjustment and Flexibility
Companies must have a flexible strategy in managing their dividend policies, according to changes in market conditions and capital requirements. This allows them to remain responsive to new opportunities and optimize long-term company value.
- written to fulfill dr Darmawan's financial management course assignments.
