This article is about analysis of if corporate change their dividend policy during the global financial crisis during 2007 to 2008 and using the lifecycle model of dividend by DeAngelo et al. (2006). It is true that dividend payouts will be affected due to a company profits, this article looks a further step into if the magnitude of the drop is justifiable by the company financial status or is there a dividend policy due to cash management changes and company viability factors.  The assumption is that 2006 was the base year taken till 2009. A timeline of 4 years sample was used. The author gathered, compared various models and data. Corporate dividend policy did shift during the global financial crisis, the 3 different type of shift are mainly dividend cut, no dividend payout and dividend initiation is significantly lower during the sample period. There are several factors that affects the probabilities of a company dividend change, mainly cash ratio, firm size, profit growth rate , capital ratio. A big company with a high cash ratio has a lower possibility of dividend policy change compared to a small company with low cash ratio. The author has felt that DDS life cycle should include significant macroeconomic events as it has a significant impact.  This article is about investor’s sentiment and market reaction to dividend news in a European perspective. Three markets were studied in this case, which is UK, France and Portugal. There is a theory that suggest that is based on the market with asymmetric information, insiders whom had the upper-hand uses the dividend policy as a form of signal to convey their firm’s performance to less informed investors from outside the firm. Which means that with dividend increase it signals a good performance, and decrease meaning that the firm is not profiting. The analysis concluded that market reaction to news about dividend change depends on investors’ sentiments during investment decision process. The findings show the results as follows. In the UK market, when sentiment is increased, the market reaction is more sensitive to dividend increase and less sensitive to dividend decrease when the sentiment is increased for French market. As for the French market, the market reactions are more sensitive to dividend decrease announcement for smaller companies. The smaller firms are more sentimental about market’s reaction to news about dividend change in the UK market. And firms with big growth or in distress are more sentimental about market’s reaction to news about dividend decreases in the UK and French market. Determinants of dividend policies for ADR firms Extensive research was conducted regarding three theories (lifecycle theory, signaling theory, catering theory) for explaining dividend policies. Among them, many researchers have supported lifecycle theory as the better recognized theory in explaining observed corporate cash dividend policies. The lifecycle theory states that established firms ...

1. This article is about analysis of if corporate change their
dividend policy during the global financial crisis during 2007 to
2008 and using the lifecycle model of dividend by DeAngelo et
al. (2006). It is true that dividend payouts will be affected due
to a company profits, this article looks a further step into if
the magnitude of the drop is justifiable by the company
financial status or is there a dividend policy due to
cash management changes and company viability factors.
The assumption is that 2006 was the base year taken till 2009. A
timeline of 4 years sample was used. The author
gathered, compared various models and data.
Corporate dividend policy did shift during the global financial
crisis, the 3 different type of shift are mainly dividend cut, no
dividend payout and dividend initiation is significantly lower
during the sample period. There are several factors that affects
the probabilities of a company dividend change, mainly cash
ratio, firm size, profit growth rate , capital ratio. A big company
with a high cash ratio has a lower possibility of dividend policy
change compared to a small company with low cash ratio. The
author has felt that DDS life cycle should include significant
macroeconomic events as it has a significant impact.
This article is about investor’s sentiment and market reaction to
dividend news in a European perspective. Three markets were
studied in this case, which is UK, France and Portugal. There is
a theory that suggest that is based on the market with
asymmetric information, insiders whom had the upper-hand uses
the dividend policy as a form of signal to convey their firm’s
performance to less informed investors from outside the firm.
Which means that with dividend increase it signals a good
performance, and decrease meaning that the firm is not
profiting.
The analysis concluded that market reaction to news about

2. dividend change depends on investors’ sentiments during
investment decision process.
The findings show the results as follows. In the UK market,
when sentiment is increased, the market reaction is more
sensitive to dividend increase and less sensitive to dividend
decrease when the sentiment is increased for French market.
As for the French market, the market reactions are more
sensitive to dividend decrease announcement for smaller
companies.
The smaller firms are more sentimental about market’s reaction
to news about dividend change in the UK market.
And firms with big growth or in distress are more sentimental
about market’s reaction to news about dividend decreases in the
UK and French market.
Determinants of dividend policies for ADR firms
Extensive research was conducted regarding three theories
(lifecycle theory, signaling theory, catering theory) for
explaining dividend policies. Among them, many researchers
have supported lifecycle theory as the better recognized theory
in explaining observed corporate cash dividend policies. The
lifecycle theory states that established firms are likely to pay
dividends than less established firms. For signaling theory, it
states that firms may increase cash dividends as an indicator to
investors that expected future cash flows have increased. Lastly,
the catering theory states that demands of shareholders
influence the company’s policies. Many researchers have
refuted this theory, as it cannot fully justified dividend policies.
This study examines whether an ADR firm’s size, profitability,
growth opportunities, earned and contributed capital mix, and
macro-economic conditions in its home country are in relation
to the profitability of the firm fitting into one of the five

3. defined dividend paying classes (e.g. payer, non-payer,
switcher). This study also examines whether characteristics of
the same firm affect the likelihood of a dividend paying ADR
firm’s decision to increase its dividend, decrease, or remain the
same from the previous quarter.
Findings in this study are that ADRs simplify the process of
investing in non-US firms by American investors. Factors in
this study being identified as determinants of dividend policies
of US and non-US firms, only somewhat explained the dividend
policies of ADR firms. Results have shown that size, growth
opportunities, earned and contributed capital mix, are related to
the decision for consistent pay cash dividends by ADR firms. It
also shown that increased in profitability reduce the risk that an
ADR firm will decrease its dividend; whereas if poor economic
conditions occurs in the home country, it increase the risk an
ADR firm will decrease its dividend.
Review of inflation and the dividend policy of US firms. The
objective of this study is to analyze the dividend policy of firms
from a macroeconomic perspective when taking inflation and
real growth into account. By applying cointegration techniques
to examines the relationship between dividends, corporate
earnings, real growth and inflation in the states. The
cointegration tests are suggested by Lanne and Johansen. The
finding of this study show clearly that inflation is indeed
contributing to dividend growth. The test can be explained in
different possibilities. Assumptions of prudent level of dividend
income to be paid out to their investors may be seen in US
firms. This would mean the belief in existence of certain
optimal dividend policy in real terms in the corporate sector.
There also another explanation would require a by far less
active role of management, as inflation may simple increase the
nominal volume of cooperate earnings and given that dividends
are paid as a percentage of earnings thereby also the volumes of

4. dividends. Overall the findings of this study explain that higher
inflation leads to higher dividends.
Omani firms use large dividend distribution to attract investors.
However, investors are required to understand the differences in
dividend policies between developed market and Omani
companies before making their investment. Oman only has a 12
per cent flat tax rate on corporate income. It is made
compulsory by Capital Market Authority (CMA) to have a
dividend policy for all firms and unveil in the annual reports.
The Western countries distribute dividends moderately in
comparison to the Omani companies who distribute almost 100
per cent of their dividends. Firms failed to comply in
accordance to the Code of Corporate Governance. The high
dividend payout ratio in Oman may be attributable to the
absence of taxes on dividends and therefore impacted on the
dividend stability Government ownership, dividend signalling
and relatively weak corporate governance propose that firms
may experience stable dividend policies. While the absences of
taxes, variability in cash dividend payment and high bank
leverage may also propose that firms may experience unstable
dividend policies. To calculate the ideal dividend policy, it is
best to use earnings per share (EPS) and dividends per share
(DPS) instead of total earnings. It is more appropriate to use per
share data instead of average data.
Assignment
Title: Dividend Policy in practice
This assignment is designed to familiarise you with the research
on dividend decisions of firms in practice. This will help you
relate theory to real world practice. Objective of this

5. assignment is to integrate your text-book knowledge with
empirical research in the corporate world. What you are
assigned to do in this assignment can suitably be called Review
of Research.
1. Structure of the assignment:
(a) There be an Introduction section. In Introduction you may
write about dividend policy in brief and then indicate what you
are going to do in the assignment.
(b) Then the main part of assignment, which you can give a
name something like Review of empirical research on dividend
decision
(c) Conclude the assignment with Conclusion section. In this
section you should give a synopsis of what you find from 5
articles.
Not exceeding 1200 words.