AnEssayonDividentPayoutPolicy.doc

Corporate Finance Individual Written Assignment Question: The Dividend Payout Controversy is one of the 10 unsolved problems in finance, according to Brealey, Myers and Allen (2014). Many people believe dividends are good; others think that dividends attract more tax and therefore it is better for firms to repurchase stocks; still others believe that, as long as the firms’ investment decisions are unaffected, the payout decision is irrelevant. Rather than inquiring whether dividends are good or bad, Brealey, Myers and Allen (2014) suggest that perhaps we should be asking when it makes sense to pay high or low dividends. In this regard, they admit that we don’t know enough yet about how payout policy varies or should vary from firm to firm. We also lack an understanding of how firms’ dividend payout policy changes over time, and how that policy change affects firm value. Requirements: Collect a minimum of three Hong Kong-listed companies with a listing history of at least fifteen consecutive years. Find out the amount of dividend payout each year, from the first year of public listing up till the latest year. Describe how the companies’ dividend payout has been changing over time. Consider augmenting your discussions with a model (i.e. mathematical representation) of dividend payout. Discuss the companies’ dividend policy as articulated by the companies. Are the actual payouts consistent with such a stated policy? What factors do you think are associated with the individual companies’ dividend payout over time? Support your discussions with relevant empirical evidence. Based on academic studies and your own empirical observation, summarize the key factors which may affect how payout policy varies from firm to firm, and over time. You may want to refer to some reference books and journal papers when answering the above questions. Your essay should be well organized, and should demonstrate reasonable logic and correct grammar as well as a basic understanding of