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Some economists would argue that dividends payout to shareholders have positive effect by increasing the shareholders’...

Some economists would argue that dividends payout to shareholders have positive effect by increasing the shareholders’ value. Taking into consideration the “rightist” views, suggest whether rightist approach is fundamental and applicable for payout decisions and argue why dividend payout policy might be irrelevant for shareholders?

Solutions

Expert Solution

As per the rightist views, that providing dividend is fundamental and it will add value to the share holders is very myopic in nature because providing dividend to shareholders is the other way of conveying that company is sitting with the pile of cash and indecisive about how to utilize it in the near future.

The share holders might be looking to invest for a longer period of time, depending upon the fundamental assessment of the long term nature of the business, its revenue stream and how the company is using its resources to develop the competitive nature, giving dividend will only convey about the management not decisive of future expansion.

The company can use the cash for any kind of integration whether vertical or horizontal integration or in research projects for seeking new product development so as to develop as a whole and start serving more stakeholders which will keep the confidence of the shareholders about the growth strategy and overall development of the company.

jeff jeffy answered 1 year ago
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