Factors influencing dividend policy decisions.

Details

Supervisors

Colmant, Bruno

Faculty

Louvain School of Management

Degree label

Master [120] en Ingénieur de gestion

Abstract

The goal of this Master's thesis is to try listing and describing the possible factors influencing both a company and its stockholders while discussing the dividend policy. It is interesting to note that these factors could be more than just financial or economical. To proceed, we review the historical literature, especially the assumptions laid by Modigliani and Miller in 1958 and 1961. Black’s Dividend Puzzle (1976) sends the researchers on a quest for answers. We find four major factors and multiple others that could explain the dividend policy decisions, but researchers sometimes struggle to empirically prove their effect. We then review two empirical studies, and finally conclude that the strongest argument in favor of dividends is their historical presence, causing an irrational preference for dividends over share repurchases.