This is a review presentation of research article. This paper also states how the given research can be replicated in Nepal

1. Factors Influencing Dividend
Policy Decisions of Nasdaq Firms
Presented by:
Ishwor Tripathi
2nd semester
MFC 5th batch
1
H. Kent Baker
E. Theodore Veit*
Gary E. Powell
Review Presentation

2. Introduction
Objectives
Methodology
Results and Conclusions
Replicability in Nepal
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4. •Availability of many theoretical models
•Factors that help decide dividend policy decisions
•Deciding size and pattern of distribution
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6. 1. To identify most important factors used by US companies that trade on
NASDAQ Stock Market in making dividend policy decisions.
2. To determine whether the factors influencing dividend policy differ
based on industry type.
3. To collect and report information about how managers administer
dividend policy.
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8. Questionnaire
Consisted three sections:
• First- rank level of importance of 22 factors (Table 2)
• Second- questions about administration of dividend policy (Table 4)
• Third- asked respondents to indicate level of agreement/disagreement with
27 statements about dividend policy in general.
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9. Sample
• Firm’s stock traded in NASDAQ
• Paid dividends each quarter of 1996 and 1997
• Standard & Poor’s Compustat to identified 651 US firms
• Mailed to 630 firms, available information
• Response- 188 (29.8%)
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10. • Partitioned group into:
Financial firms: finance, insurance and real estate (64.4%)
Non- financial firms: (35.6%)
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12. Importance of factors in determining dividend
policy
Focused on 8 factors, 2 clusters:
1st cluster:
1) Pattern of Past dividends
2) Stability of earnings
3) Level of current earnings
4) Level of future expected earnings.
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13. 2nd cluster:
1) Concern about affecting the stock price
2) Concern about maintaining a target capital structure
3) Desire to maintain a given dividend payout ratio
4) Concern that a dividend change may provide a false signal to investors.
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14. Response differences : financial vs non-
financial firms
Conducted two tests:
• 1st test: Spearman’s rank order correlations (0.812 at 0.01)
• Sig. relationship between two type of firms.
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15. • 2nd test: Chi-square test for independent samples
• Response of managers of 2 firms differs on 9/22 factors.
• (F1, F3, F4, F9, F13, F6, F18, F12 AND F10)
• Financial firms views it more important.
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16. Administration of dividend policy
• CEO’S influence in both firms while developing dividend policy.
• Annually re-examine dividend policy in both firms.
• Most of the financial firms have explicit target payout ratio
• Most of the non-financial firms don’t have explicit target payout ratio
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17. Replicability in Nepal
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18. Similar research can be replicated in Nepal as well:
• Identify firms that pays dividend at least yearly.
• Differentiate them into financial and non-financial firms.
• Send similar questionnaire used in this research.
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