Research On The Optimal Dividend Policy Of The Company

The main content of this thesis is to study the optimal dividend policy of the company.At the very beginning of this thesis, the author analyzed the main theory which leads dividend policy . The ultimate purpose of a company is to pursue benefits and to satisfy the shareholder's need for maximum utility. The main reason for insufficient study on dividend policy can be attributed to MM theory in which irrespective conclusion is made between dividend policy and stock value. The present method of fixing the stock's value is to adopt mathematic model discounting dividend or cash flow. The model is static and dividend or cash flow in each period is pre-fixed. As we can see, many questions are neglected in this model such as what factor decides dividend and what kind of mutual effects exist among dividends in different periods etc. Although the later theories tend to admit the correlation between dividend and stock value, the old method is still adopted for the research of the optimal dividend policy. During application, the later theories work like this : firstly, analyze thefactors which affect the dividend policy, then build up mathematic model through statistic analysis on each factor. This thesis involves a creative study on the optimal dividend policy embodying new research method and mathematic model. Firstly, proved the existence of the optimal dividend policy on the condition of MM theory (although dividend policy can not affect stock value, it can affect shareholder's utility). Secondly, proved the feasibility of this policy without MM conditions. The qualitative conclusion drawn in different conditions (with MM conditions and without MM conditions) is the same, although the quantitative result may be unsame due to the effects of different conditions. The dynamic study method in this thesis is described as below: Firstly, begin with shareholder's utility function (like the starting point in micro-economy). Secondly, find out the relationship between the optimal dividend policy and stock value, then establish dynamic restrictive equation. Thirdly, through the research of equilibrium, find out dynamic path for the optimal dividend policy. Lastly, if the state is non-equilibrium, the thesis also shows us the adjustive path. The conclusion for this thesis is : the optimal dividend policy does exist and this policy depends on the shareholder's utility function, the capital in first period and the utility's discounting rate of each period . In the state of equilibrium, the optimal dividend is the average of capital infirst period and total profit. On the wider conditions, the optimal dividend policy is also affected by capital discount, debt and interest rate. If the optimal dividend policy does not accord with the equilibrium state, through the author's model, we can find out the convergent rate of capital at different periods to equilibrium capital. Eventually reach the optimal dividend result.