Accounting And Finance Dissertation Data Analysis Sample 1

This section of the study discusses the main objectives of the research that what were the aims of the study and what related information is being reviewed while studying for these objectives. In this study, there were mainly three objective which were need to be achieved. However the fourth objectives was to provide recommendations to the UK listed companies to increase their amount of dividend in order to enhance the shareholder value which would result in the increased level of interest from the investors towards making investment in an organisation. First objective of the study was to understand the conceptual significance of the dividend policy and the shareholders wealth which is usually focused towards the investors. While the second objective of the study was to identify the factors of the dividend policy which influence the shareholders wealth and the overall firm performance, these two are the necessary elements of the analysis of an organisation in terms of benefits they have been providing to their shareholders. 

Objective 1: To understand the conceptual significance of dividend policy and shareholders wealth  

There are multiple aspect which have been determined in order to analyse the significance of dividend policy and the shareholders wealth, as it has been studied that the investors are interested to invest in the companies where they have opportunity to earn better. Therefore, in such a case, it becomes clear that the companies should not only be focused towards the earning per share but also the dividend which is being paid to the shareholders in the form of their reward in return of their investment in the company. However, the dividend pay-out decision also affects the firm’s long term benefits in positive manner as the company is being considered as favourable to the market investors. Furthermore, it has also been studied that the company should balance the element of shareholders wealth along with the growth of the company while paying the dividend to the shareholders. As per the study of Cundill, Smart, and Wilson, (2018), it was observed that value of the company is also being evaluated by their policies which are regarding the financial decisions of a company for their shareholders.

Another aspect which was observed that there are examples when the  companies have paid the less amount to their shareholders in terms of dividend, however they have been making profit which can be observed by their financial statement. Therefore, in such a case, overall value of the firm is being affected which reduces the market price of the company and makes it less preferable for the investors to make investment. This results in the form of reduced investment in the shares of the company creating the sustainability issues for the company. There are some of the studies which have focused that the company should focus the element of shareholders wealth more than any other. For that particular reason, there are some of the companies which start focusing the growth of their business or business expansion in various fields which demands the organisation to make more effective strategies countering the ongoing issues occurring during the strategy execution (Bryson, 2018; Broman, and Robèrt, 2017).

Shareholders wealth is being defined as the major element for influencing the decision of the investors while investing in an organisation. Therefore, it becomes evident that the organisation should make their policies in a way that the shareholders wealth should be maximised so that there would be large number of investors ready to invest in the organisation. Dividend policies are one of the players in the process of maximising the shareholders wealth for the organisation. These policies enhances the level of satisfaction among the shareholders as they start realising the fact that the company is in their favour and their investment would be returning them in better ways. According to the study conducted by Starks, Venkat, and Zhu, (2017), it was observed that the element should be focused by the organisation to further strengthen the position of the company in the market attracting more investors towards the organisation due to the policies of paying-out dividend instead of holding the amount to meet their liabilities.

Objective 2: To determine the factors of dividend policy that influences shareholders wealth and firm performance 

As it has been studied that the dividend policy plays a vital role for the shareholders wealth and firm performance, it becomes evident that there must be some of the factors which have been influencing the dividend policy. In this study, it was observed that there are mainly three factors which affect the dividend policy such as dividend pay-out ratio, dividend yield and the dividend per share. However, all these factors have different intensity of influencing the dividend policy, as the dividend pay-out ratio is being calculated by dividing the total dividend payments with net income added with noncash expanses which is subtracted by noncash sales. As per the study of Bajaja, and Jain, (2019), there are some of the scales which determines the company’s importance for the shareholders in terms of paying out the dividend such as the company paying more than 55% and limited to 75% are considered as better companies to make investment. Another aspect which was observed that the dividend pay-out ratio shows that how much the company is sustainable, on the other hand, the companies which have been sharing the higher amount of its earning in terms of dividend pay-out are sharing their major part of earning with the shareholders which indicates that there are the chances that the company would ran out of the cash which would make it difficult for the company to meet their short term liabilities (Dugan, 2018).

In addition to this, dividend yield is also being identified as one of the major player in this regard, it is also a ratio which is being calculated by the total amount of dividend and with the current price of stock in the market. Furthermore, it has also been studied that investors by the time of making investment are likely to know the dividend yield of the company as they are focused towards the opportunity of earning well through their investment. This makes it clear that the dividend yield has a direct influence over the shareholders wealth. As per the study conducted by Ali, and Waheed, (2017), it was observed that the companies which possess the dividend yield between 4 to 6 % are likely to be considered as the better options for the investment. However, the companies which are paying the lesser percentage for their dividend yield are not considered as justified in terms of making investment which affects the business of the company in significant manner. While studying about the dividend yield, it was also observed that when the companies lower their dividend, the market analyses the move and reduces the price of the stock share in the market. This affects the overall wealth of the organisation as well as the shareholders’ value which increases the element of risk for the company to sustain in the market. 

Moreover, dividend per share is being calculated by dividing the annual dividend of the company with the purchase price, which makes it easier for the company to calculate that how much amount should be paid to a specific shareholder. This factor is of the most important factor as it shows that how much amount the company is being paying to the investors against their investment. This makes it easier for the investors to evaluate that which of the company is better for investment and where they should invest which would be enabling to earn in significant manner. In such a case where the dividend per share is being calculated, it is necessary to mention that some of the companies pay the dividend annually, some of them pays it quarterly.

However, there are lesser practices of paying it on monthly basis as well.

Objective 2: To identify the impact of dividend policy on shareholder’s wealth and firm performance in UK listed firms. 

This study was focused towards the identification of the impact of the dividend policy over the shareholders wealth and the firm performance specifically for the company which have been registered and working in UK. It has been observed that the approach of investors may differ from country to country, therefore this study was limited to the case of UK listed companies. While looking for the related literature regarding the factors of the study, it was observed that dividend policy is the major player in terms of evaluating that how much the investors are interested to pay for buying the shares of a specific company. Another aspect that has been studied is that the organisations are required to have cash in hand which would enable them to meet their expanse on daily basis. Therefore, it is necessary that the organisation should focus that the investors should have better opportunity to invest in the organisation. The only interest that the investors are associated with the decision of investing in any organisation is the amount that they would be able to earn in return of their investment.

Furthermore, it has also been observed that some of the times the company hold the amount of dividend to meet their liabilities, however in such a case it is necessary to analyse that what was the history of the organisation. If the company has a better history which would enable the organisation to be in the line of making money and the investors would not be asking for the dividend at the crucial stages of the company. Additionally, the firm performance is being calculated for various purpose such as maintain the financial statements for the investors in future. It has been studied that there are some of the ratios which help the investors to analyse that how much the company has been earning, what were their expenses and other elements related to their financial matter. These elements helps the investors to analyse that whether they should start investing in that particular organisation or not.

In addition to this, shareholders wealth is the vital element in this study as the companies earning profit and paying out dividend are actually contributing the shareholders wealth. Therefore, it is necessary that the investors should keep themselves focused towards the dividend yield and dividend per share, as it would make it easier for the investors to make decision before investing. Related literature review has made it clear that there are different dividend pay-out policy which have been accepted by the organisation themselves depending on their financial abilities. Another aspect that has been studied is that the dividend policies are being made to keep the interest of the shareholders and maintain the moral higher as they are being provided to specific share of the total market value of the company. This study aims to identify the effects of the dividend policy of the company over the shareholders wealth and the firm performance of the company as the major role is being played by the opportunities which have been provided to the investors when they are going to make investment in any company.