Summary of Literature Review on Dividends

A review of Theories and Empirical Evidence. In this article, the main theories on dividend policy are described and their credibility is evaluated. Connection between the reviewed paper and my research proposal According to my research proposal, the master thesis topic will be “Comparative analysis of companies’ dividend policy: international perspective”. Therefore, the literature review on dividend policy has a direct connection to my research proposal. There are several factors that explain this connection.

First of all, any master thesis has to start with a literature review of existing studies in the studied area and these existing studies are presented in the paper. This means that the theories discussed in the paper will be described in my master thesis. This paper points my attention to the main existing theories. As a result, I know which theories I should research to a greater depth to achieve a good understanding of the studied field. Secondly, in this paper the theories are presented in an organized manner and are clearly explained. Thus, reading this paper helps me to obtain a general understanding of the theories on dividend policy.

Of course, extra research will be required on each theory but, in my opinion, a general and simplified understanding of a topic before studying it to a greater depth is always an advantage. Thirdly, the references list at the end of the paper shows which literature may be addressed when researching the dividend policy to a greater depth. Overall, this paper is an excellent foundation for my master thesis work. Division of works reviewed into categories The works mentioned in the article all address (fully or partly) the dividend policy and dividends. I propose the following classification of these works.

Works that give the definition of dividend policy – only one work is presented in this group. a) Lease, Ronald C. , Kose John, Avner Kalay, Uri Loewenstein, and Oded H. Sarig, 2000. Dividend Policy: Its Impact on Firm Value (Harvard Business School Press, Boston, Massachusttes). According to this work, dividend policy is “the practice that management follows in making dividend payout decisions or, in other words, the size and pattern of cash distributions over time to shareholders”. In my opinion, the authors of the literature review should have presented several definitions of dividend policy.