| The article of Modigliani and Miller about the irrelevance of dividend policy gave rise to a number of empirical studies which have attempted to disprove the conclusions reached by Modigliani and Miller, mainly by focusing on the various imperfections which characterize financial markets.; But although more than five decades have passed since their study, no unanimous agreement has yet been reached about the impact of dividends on company valuation.; For this reason, the objective of this thesis is to analyse the relevance of dividends in explaining the market value of company shares.; The study will be carried out at two levels: Firstly, considering how Modigliani and Miller (1961) demonstrated the irrelevance of dividends assuming perfect financial market conditions, we will analyse their relevance for the investor, and attempt to identify the theory, based on imperfect capital market conditions, which best upholds this possible relevance.; To this end, two theories (not mutually exclusive) will be examined with the aim of discovering why the investor considers dividends relevant: the Signals Theory and the Agency Theory.; Taking into account that a valuation model showing earnings and dividends is to be used, we also intend to analyse those factors which may diminish the relevance of the earnings, thus increasing the perceived importance of dividends for decision-making investors and, therefore, for share prices. The factors we will look at are those that can affect the company's earnings and their relevance. They are size, inverse PER ratio, or earnings per share divided by share price for the immediately previous year, the amount of accruals, and, given that our model is made up of European countries, we will also analyse the contextual features of the country to which the company in question belongs.; Lastly, and on a secondary level, if dividends do turn out to be relevant for the market we would like to analyse whether directors consider them a residual decision, and simply distribute them as surplus liquid assets, or, on the contrary, they implement a managed dividend policy. In the latter case, we would be interested in the factors which condition dividend payments. |
