Dividend Policy: A Comparative Study of UK and Bangladesh Based Companies

Abstract

The paper is about Dividend Policy: A Case of UK based Companies. The objective of the study is to critically examine the dividend policy of UK based companies listed in London Stock Exchange i.e., the theories of organizational dividend policy, arguments for and against of dividend, and determinants of dividend policy. The study also examines the influence of liquidity, leverage, profitability, growth, and ownership structure, and market capitalization on the dividend rate. The study reveals that as per dividend irrelevance theory dividend policy has no influence on value of the firm for the reason of home made dividend ; according to dividend relevance theory, value of the firm is influenced by dividend policy because of certainty, information content and clientele effect; liquidity, availability of worthwhile projects, availability of alternative funds, profitability, growth, leverage, reaction of market to dividend reduction, ownership structure nature of the industry, tax clientele effect are the main determinants of dividend payout ratio. In case of the UK based companies, leverage; profitability; market capitalization influence the dividend rate positively, whereas liquidity and growth have negative impact on dividend payout ratio. Liquidity; leverage; profitability; and market capitalization influence the dividend rate negatively, while growth affect positively in case of a Bangladeshi company.