Dividend Policy Plays a Crucial Role in Economy Essay

Dividend Policy Plays a Crucial Role in Economy Essay

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Dividend policy is one of the most crucially importance and the most debatable issues in the corporate finance and it still keeps on prominent place in both developed and emerging markets. According Brealey and Myers (2005) described that dividend policy as one of the top ten most difficult unsolved problems in financial economics. This description is consistent with a famous extract by Black (1976) who stated that “The harder we look at the dividend picture, the more it seems like a puzzle with pieces that don’t fit together”.

Hence, dividend is a payment made by corporation to its shareholders members. It is the portion of corporate profit paid out to shareholders. When a corporation earns a profit or surplus that money can be locate by two uses. Which it can either be re-invested in the business that called retained earnings or it can be distributed to all shareholders. There are two ways to distribute cash to shareholders, such as share repurchases or give dividends. Many corporations retain a portion of their earnings and pay the remainder as a dividend.

There are many studies shows that many factors affecting on determinants of dividend payout ratio by some industries in different countries such as Pakistan, United States, Saudi Arabia, India and Kenya has also been conducted in order to illustrate the relationship between a number of factors and the company’s dividend payouts to shareholders. Even though many studies have been conducted, the results show that there are some differences between countries as regards which factors that have an impact on dividend payouts. According to Abdulrahman (2007) said that dividend payout and sectors are not related, but according to Pandey (2007) stated that divi...

... middle of paper ...

...fit to the shareholder as well as researcher to use the information before deciding to invest in Employees Provident Fund. This study also will provide an opportunity to add a new knowledge on the performance of Employees Provident Fund to shareholder and investor in financial planning.


This study has the restriction due to the limited source of data and it might have a wrong interpretation result from the lack information and understanding of the research. Moreover, the information that used in this study is based on secondary data. The accuracy of the study depends on the precision of the data obtained.

The data used in this study is only from the year of 2002 until 2013. The result of the study will not exactly accurate for determining the factors that influence dividend payout ratios in Employees Provident Fund.

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