Monthly Archives: September 2009

What is speculative bubble? “A (speculative) bubble is a continuing growth in the price of an asset that cannot be justified by its fundamental value” (Hoshi and Kashyap, 2001) usually upon expectation of the rise of the asset price A … Continue reading →

The objectives of fiscal policy Over the medium term, to ensure sound public finances and that spending and taxation impact fairly within and between generations: and Over the short term, to support monetary and, in particular, to allow the automatic … Continue reading →

To see why the cost of capital is considered to be a significant influence on firms’ investment, we can consider first the capital budgeting decision of firms It would have been beneficial to note why investment and therefore understanding the … Continue reading →

In general, the managers may pursue selfish strategies if the firm has plenty of cash flow. So, dividends can reduce agency costs by reducing cash flows and serving as a discipline mechanism on management. With large dividends, the firm may … Continue reading →

Empirically companies payout dividends with high ratio, and they spend much time and energy on deciding how much to pay out as dividends to maximize firm’s value. According to Gordon(1959)’s dividend discount model, firm’s value goes positively with the change … Continue reading →

The decision of dividend is made by the board of directors. The chronology of dividend is as follows. 1. Declaration date : the board of directors passes a resolution to pay dividends. 2. Ex-dividend date : The stockholders who trade … Continue reading →

When companies make earnings, they should decide to reinvest in the company or payout to the shareholders out of earnings. Decision process on how much to reinvest and how much to payout is dividend policy. If dividend policy does not … Continue reading →