Why companies pay dividend Essay Example | Topics and Well Written Essays - 1500 words

Why companies pay dividend - Essay ExampleThe different tax treatment between dividends and capital gains however generally cipher against the former. A number of companies pay dividends and in some, it is a given in the way their organizations are run. This paper will explore why anyone cares about it at all. Specifically, this paper will address the questions why companies pay dividends why investors pay attention to it do dividends affect an organizations value and how do managers affair dividends in the organizational financial management among others. The idea is to identify whether dividends have any bearing or effect on an organization particularly in terms of equity and firm value.The review on the current dividend literature provided in the following section is particularly rivet on the areas related to the irrefutable and negative characteristics of dividends to business organizations. Such outline of studies was aimed at determining how other scholars answered the ques tion posed by this paper. The review summarizes the current studies and research on dividends policy, particularly. An primary(prenominal) dimension to the review, however, which would have a pivotal effect on this paper as a whole was the passage of the Jobs and Growth Tax Relief atonement Act.The corpus of literature available in regard to corporate payout policy and dividends is extensive. However, this review would focus on two major areas why do dividends government issue for corporations and does it matter how business organizations distribute cash to its shareholders.Miller and Modigliani are considered to be the authorities in regard to framing dividend questions in their finance research. They, particularly focused on how dividend policy is considered a choice between financing with internal equity or financing with external equity. In their study, Miller and Modigliani offered proof that dividends do not matter in a world that is characterized by