Surveying the literature: economists' view of dividend policy and stock issues

Article Abstract:

Dividend policy issues are considered a moot point from economists' Merton Miller and Franco Modigliani points of view. Their dividend-irrelevance proposition takes the extreme stand that the firm's value is not altered with dividend policy changes. A more moderate view places dividend policies in a secondary role to investment decisions. One of these decisions is that of stock issues and the subsequent dilution ratio. Studies on the effects of issuing new stocks on a firm's profitability is one vantage point for evaluating the manner of distributing profits or the dividend policy.

Dividends, Miller, Merton, Modigliani, Franco

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The 1986-88 stock market: investor sentiment or fundamentals?

Article Abstract:

Investor sentiment and fundamentals are oft-cited reasons for the stock market crash of 1987. However, no empirical study has ever been conducted to see if such assertions are true. To remedy this problem, weekly data on the stock market in the period 1986-1988 is used to measure fundamentals and investor sentiment. Results indicate that changes in fundamentals contributed to the stock market crash. However, investor sentiment was found to be an insignificant factor behind the crash.

Investors, Stock Market Crash, 1987

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Signaling theory and risk perception: an experimental study

Article Abstract:

Signaling theories can be effective in reconciling differences between solutions indicated by theoretical models and the actual behavior of firms' management. However, the validity of most signaling theories are difficult to determine empirically. It is assumed that greater proportion of entrepreneur participation in a project translates into higher stock price. This was proven true after a signaling theory was tested empirically.

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