Question

In: Finance

Should stockholder demographics or the lifecycle position of the firm impact the Board's dividend policy decisions?

Should stockholder demographics or the lifecycle position of the firm impact the Board's dividend policy decisions?

Solutions

Expert Solution

Ans) Dividend refers to the payment made to the shareholders by the company as a part of profit earned by the company. Stockholders demographics refers to analysing the characterists of the groups of shareholders with respect to the factors such as age , race and sex of the shareholders or Stockholders. Lifecycle position of the firm means the phase in which the firm is, the following phases a firm can have initial phase , maturity phase and the declining phase . As we can know that a firm does not pay dividend at the initial phase and at maturity when it is earning good profits pays the dividend hence payment decisions of the Board also affect the financial soundness of a firm and tells to the outside world that the company is running profitabley hence lifecycle position of a firm impacts the board dividend policy as dividend paying firms attracts shareholders and they tend to retain the share for higher dividend as against earning capital gain while sellin the share. On the other hand stockholders demographic in US in particular has a graet Gap as only around 14 percent US households holds ownership stock in US hence not everyone is gaining from the stockmarket certainly here the main demographic factors are age, race and financial status the main contributors to affecting the board dividend policy are age , as youg people has more tendency to take risks as compare to olderly person, hence to gain from the financial choice of young investors who has plenty of money the board dividend policy is altered as it required high dividend similarly the rich can be attracted with a higher dividend - payout. Hence both stockholders demographic and life cycle position of firms affect boards dividend decision.


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