Introduction.
It is said that there are many reasons for paying dividends and many other reasons for not paying any dividends. The result of this sentence is that dividends are controversial. Dividend it is mainly cash, or other benefits, distribution for earnings. Dividends has following types:
• Regular dividends: those paid by company quarterly, semiannually or annually.
• Extra dividends: paid once and not to repeated
• Special dividends: unlikely to be repeated
• Stock dividends: paid in shares of stocks.
For the long time the debate is hold on how the dividend policy affects company value. Some of the researchers believe that dividends increase investors wealth (Gordon 1959), others suggests that dividends are irrelevant (Miller and Modigliani, 1961 and Miller and Scholes ,1978) while there are still others (Litzenberger and Ramaswamy, 1979) that tends to believe that dividends decrease investors wealth. In 1961 Miller and Modigliani rose the theory that can be summarized as dividend irrelevance. In 1976 Black has disagreed with Miller and Modigliani but instead of offering some alternative theory, rose important questions:, why companies pay dividends , and why the investors pay attention to the dividends. The different views about dividends and their relevance will be discussed in this paper.
Dividend irrelevancy theory.
In year 1961 Merton Miller and Franco Modigliani raised their theory about dividend irrelevance. The theory was based on following assumptions:
1. There are no transactional costs that are associated with converting shares into cash
2. Issuing shares by company incurs no fl ...