Dividend Policy Dividend policy is the decision a firm makes to pay out earnings or retain them for reinvestment in the firm. If it pays out dividends, company policy must determine the amount to retain. Two questions drive a firm’s dividend policy: Does dividend policy have an effect upon the firm’s value? If so, will the firm try to achieve an optimal payout ratio by attaining an ideal dollar payment per share? These questions have sparked debate between practitioners and academicians for many years. Practitioners see an optimal level of dividend payout, whereas some academic factions have argued that dividend policy does not affect the value of the firm at all.

 

DOI: 10.1007/0-387-26336-5_672
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