Summary of Dividend Policy

This article is about analysis of if corporate change their dividend policy during the global financial crisis during 2007 to 2008 and using the lifecycle model of dividend by DeAngelo et al. (2006). It is true that dividend payouts will be affected due to a company profits, this article looks a further step into if the magnitude of the drop is justifiable by the company financial status or is there a dividend policy due to cash management changes and company viability factors. 

The assumption is that 2006 was the base year taken till 2009. A timeline of 4 years sample was used. The author gathered, compared various models and data.

Corporate dividend policy did shift during the global financial crisis, the 3 different type of shift are mainly dividend cut, no dividend payout and dividend initiation is significantly lower during the sample period. There are several factors that affects the probabilities of a company dividend change, mainly cash ratio, firm size, profit growth rate , capital ratio. A big company with a high cash ratio has a lower possibility of dividend policy change compared to a small company with low cash ratio. The author has felt that DDS life cycle should include significant macroeconomic events as it has a significant impact.