Distributions to Shareholders参考.ppt

* * * * * * * * * * * * * * * * * * * ? 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part. ? 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part. ? 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part. Distributions to Shareholders Investor Preferences on Dividends Signaling Effects Residual Dividend Model Dividend Reinvestment Plans Stock Repurchases Stock Dividends and Stock Splits Chapter 15 15-* What is dividend policy? The decision to pay out earnings versus retaining and reinvesting them. Dividend policy includes High or low dividend payout? Stable or irregular dividends? How frequent to pay dividends? Announce the policy? 15-* Dividend Irrelevance Theory Investors are indifferent between dividends and retention-generated capital gains. Investors can create their own dividend policy If they want cash, they can sell stock. If they don’t want cash, they can use dividends to buy stock. Proposed by Modigliani and Miller and based on unrealistic assumptions (no taxes or brokerage costs), hence may not be true. Need an empirical test. 15-* Why Investors Might Prefer Dividends May think dividends are less risky than potential future capital gains. If so, investors would value high-payout firms more highly, i.e., a high payout would result in a high P0. 15-* Why Investors Might Prefer Capital Gains May want to avoid transactions costs Maximum tax rate is the same as on dividends, but … Taxes on dividends are due in the year they are received, while taxes on capital gains are due whenever the stock is sold. If an investor holds a stock until his/her death, beneficiaries can use the date of the death as the cost basis and escape all previously accrued capital gains. 15-* Wha