A STUDY ON DIVIDEND POLICY AND ITS EFFECT ON SHAREHOLDER VALUE AND FIRM PERFORMANCE

Abstract

Dividend policy is an important financial decision that determines the proportion of profits distributed to shareholders and the portion retained for future growth. The main objective of this study is to analyze the impact of dividend policy on shareholder value and firm performance. Dividend decisions play a significant role in influencing investor confidence, market value of shares, and the overall financial stability of an organization. This study examines how different dividend policies, such as high dividend payout, low payout, and retained earnings strategies, affect the financial performance of firms and the wealth of shareholders. The research focuses on key financial indicators such as profitability, earnings per share, return on equity, and market value to understand the relationship between dividend distribution and corporate performance. The study is based on secondary data collected from financial reports, journals, and other relevant sources. Analytical methods are used to evaluate how dividend policy contributes to maximizing shareholder wealth and improving firm performance. The findings of the study highlight that a well-structured dividend policy can enhance investor satisfaction, maintain market reputation, and support sustainable financial growth. The research concludes that dividend policy plays a crucial role in balancing the interests of shareholders and the long-term development of firms. Proper dividend decisions help companies maintain financial stability while creating value for shareholders.