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A STUDY OF DIVIDEND POLICY, NEW SHARES AND SHARE REPURCHASE.

Research Project

Project/Area Number 08630117
Research Category

Grant-in-Aid for Scientific Research (C)

Allocation TypeSingle-year Grants
Section一般
Research Field Business administration
Research InstitutionOITA UNIVERSITY

Principal Investigator

UZAKI Kiyotaka  FACULTY OF ECONOMICS,OITA UNIVERSITY,ASSOCIATE PROFESSOR, 経済学部, 助教授 (20232811)

Project Period (FY) 1996 – 1998
Project Status Completed (Fiscal Year 1998)
Budget Amount *help
¥2,100,000 (Direct Cost: ¥2,100,000)
Fiscal Year 1998: ¥500,000 (Direct Cost: ¥500,000)
Fiscal Year 1997: ¥500,000 (Direct Cost: ¥500,000)
Fiscal Year 1996: ¥1,100,000 (Direct Cost: ¥1,100,000)
KeywordsDIVIDEND POLICY / LINTNER / TAX BASED MODEL / SIGNALLING MODEL / CASH FLOW / BOND / NEW SHARES / シグナリングモデル / 自己株式買い戻し / シグナリング仮説 / フリーキャッシュフロー仮説 / エージェンシー仮説 / 株価対策 / 株価政策
Research Abstract

M-M theory (Modigliani Franco and Merton MilIer, 1958) says that investment is independent of how it is financed.
Indeed , this is true if there are no taxes or if there are no bankruptcies and the corporate tax rate is equal to the individual marginal tax rate (with the dividend tax and the capital gains tax rates being zero) But if both taxes and bankruptcies are present the value of the firm is not independent of its financial structure and the firm's investment and financial decisions are interrelated.
A tax-based model assumes that the firm determines investment and financial policies so as to maximize its share price while allowing many menus of tax rates. The main results of this model can be summarized as follows.
If the firm's after tax profits are small relative to the level of investment, the firm finances investment by retention and debt.
If they are large relative to the level of investment, additional investment projects are financed with new shares and debt. In the intermediate case, additional finance comes entirely through debt.
However this model doesn't explain the fact that firms pay dividends, despite obvious tax disadvantages. Nor does it explain the common practice of paying dividends and issuing new equity simultaneously, since a company could presumably reduce dividends and new equity issues by equal amounts, thereby reducing tax liabilities without altering net distributions.
Why do companies pay dividends ?
This is next question that has proven to be one of the most vexing puzzles in economics.
Many theories including the tax-based model have been proposed, but none has earned general acceptance. In this project, I aim to offer another explanation of the dividend puzzle and financial hierarchy, based upon a simple model in which firms attempt to signal profitability by distributing cash to shareholders.

Report

(4 results)
  • 1998 Annual Research Report   Final Research Report Summary
  • 1997 Annual Research Report
  • 1996 Annual Research Report
  • Research Products

    (6 results)

All Other

All Publications (6 results)

  • [Publications] 鵜崎 清貴: "「資金調達」『現代企業の財務管理』" 創成社(発表予定), (1999)

    • Description
      「研究成果報告書概要(和文)」より
    • Related Report
      1998 Final Research Report Summary
  • [Publications] 鵜崎 清貴: "「現在企業とディリバティブ」『現代企業の財務管理』" 創成社(発表予定), (1999)

    • Description
      「研究成果報告書概要(和文)」より
    • Related Report
      1998 Final Research Report Summary
  • [Publications] KIYOTAKA UZAKI: "FINANCIAL MANAGEMENT", FINANCIAL MANAGEMENT OF MODERN CORPORATE ed.by SHOZOU ICHIMURA. SOUSEISYA (forthcoming)., (1999)

    • Description
      「研究成果報告書概要(欧文)」より
    • Related Report
      1998 Final Research Report Summary
  • [Publications] KIYOTAKA UZAKI: "MODERN CORPORATE AND DERIVATIVE" FINANCIAL MANAGEMENT OF MODERN CORPORATE ed.by SHOZOU ICHIMURA. SOUSEISYA (forthcoming)., (1999)

    • Description
      「研究成果報告書概要(欧文)」より
    • Related Report
      1998 Final Research Report Summary
  • [Publications] 鵜崎 清貴: "「資金調達」『現代企業の財務管理』" 創成社(発表予定), (1999)

    • Related Report
      1998 Annual Research Report
  • [Publications] 鵜崎 清貴: "「現在企業とディリバティブ」『現代企業の財務管理』" 創成社(発表予定), (1999)

    • Related Report
      1998 Annual Research Report

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Published: 1996-04-01   Modified: 2016-04-21  

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