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Dividend Policy and Market Valuation in British Industry
Author(s) -
RYAN TERENCE M.
Publication year - 1974
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.1974.tb00873.x
Subject(s) - dividend policy , dividend , earnings , profitability index , valuation (finance) , neutrality , economics , financial economics , stock exchange , dividend yield , business , monetary economics , accounting , finance , philosophy , epistemology
The objectives of the article are: firstly, to identify the principal factors which determine interfirm variation in dividend policy within the UK; and secondly, to examine the effect of dividend policy on company stock‐market valuation. This cross‐section empirical study is based on a random sample of 60 publiclyquoted British companies, and refers to the year 1970. The Lintner (1956) model is rejected, in that capital requirements and earnings risk are seen to play an important part in determining dividend policy. The ‘dividend neutrality’ hypothesis is strongly rejected once risk and profitability‐of‐retained‐earnings are taken into account.