How to Dividend Impact on Company Performance
The purpose of this writing is to see the effect of dividend policy on the stock price of the oil and gas industry in the context of Pakistan. For this purpose, different companies’ financial statements reviewed and dividend theories have been empirically tested. There are two main schools of thought in the field of finance and both have adverse opinions. One school of thought followed the Miller and Modigliani and measured dividend policy irrelevant while other schools of thoughts followed the Gordon and measured dividend policy-relevant. But after sixty years it stills debated whether dividend policy-relevant or not. A lot of studies have been done but still, there is a gap exists about the association of elements with the share price. This study helps the investors that in which security they must to invest or not while they are making the investment decision. It will also help the investors that which factor affect the share price through this procedure it will become easier to analyze the securities.
The investor can try to increase his wealth if he is a risk-taker by denying taking cash but to prefer capital gain. The share price informs investors that internal matters are handling strongly and the management doing their job excellently. Managers are saving their interest and not to get fired by the management. In preliminary corporate finance, the dividend policy was just concerned with paying cash dividends to shareholders or retained earnings. While today’s corporate finance concerned with more issues like, how the firm can attract investors in different tax brackets or how the firm can increase the share price and so on.
In the field of corporate finance dividend policy is one of the most broadly investigated topics. But the debate remains among researchers, policymakers, and mangers whether the dividend policy affects the stock prices. Dividend policy means that how many portions of earning will be distributed among shareholders and how much as retained earning they keep for reinvesting purposes. Almost every firm follows the dividend model or policy and it indicates the financial performance of the firm. Mostly the investor attracts from the dividend paid by the company as compared to the previous year if its increase that leaves the positive impact if the dividend paid decrease as compare to past the result shows negativity impact on the company.