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Essay / Research Paper Abstract
This 5 page paper considers the way that dividend signalling is used and how it differs in UK companies compared to German or Japanese companies. The writer argues that this is due to the differing models of corporate governance in each country, with the UK using the Anglo-American model of capitalism, with short term goals and individualism taking priority, compared to the longer term, stakeholder approach of the Germans. The bibliography cites 11 sources.
Page Count:
5 pages (~225 words per page)
File: TS14_TEdivsig.rtf
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Unformatted sample text from the term paper:
divides is argued to be a good way of management communicating the market, as well as the shareholders, how optimistic they are regarding the future of the company, and as
such this has a knock on effect on the price of the share (Lippert et al, 2000). In effect a tool to overcome the asymmetry of information that is endemic
in the environment. There is also a theory that states there will be a role seen n terms of ratios, ands that a book to market ratio may also
be used when considering the way the market will respond to dividend signalling (Milgrom and Roberts, 1982, Kreps and Wilson, 1982). This theory was further proven to have merit by
Pilotte and Manuel (1996). In this there is also a need to consider the role and reputation of the company making the signalling. For example a company that has a
high book to market ratio is likely to have a good track record of choosing projects and identifying opportunities (Lippert et al, 2000). Therefore, these companies mangers will have a
higher level creditability, meaning a signalling by one of the high ratio book to market ratio is likely to be taken more seriously, further increasing the share value and further
increasing the book to market ratio (Lippert et al, 2000). If we look at the UK and consider what effect this has then we need to remember that whatever
generalisations we make, there will be expectations. In a market where there is a need to keep share prices up for the economies sake, as well as due to the
way in which many executives has bonus schemes based on share price, then we may start to appreciate why the UK may be seen as different from other countries such
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