1.1 BACKGROUND OF STUDY
The owner or shareholder of any business expect their investment to earn a return that reward is expected to be commensurate with the perceived riskiness of the investment.
There are many alternative vehicles for the investment of capital, so a particular investment often be said to carry an opportunity cost. This is the difference between the actual return forgone from the alternative investment, olowe (1997) noted that the maximization of shareholders wealth is the most superior of all the objectives considers timing of return, take account of both return and risk and it balances short and long-term benefits. There is an important incentive sectors companies.
In the case of a company listed on a stock exchange, shareholders who are not satisfied with the performance of their investment are able to sell their share and invest elsewhere, ownership rights are readily trade able and this provided a strong incentive for manager to focus on enhancing the value of manager to focus on enhancing the company (shareholders value). It is in the light of this that dividend decision ought to be evaluated with the aim of maximizing the firm to its shareholder through market price of the share and the current dividend.
Rey holds (2001) noted that despite the common assertion that higher wealth gains to shareholders. Would result from the use of repurchases instead of dividends, firms continue to increases the size of dividends annually and not increases repurchase at an even faster rate. This indicates that dividend remain a mystery.
The present research attempts to provide some owners in this regard. The problem at hand, then is to provide insights as to why some firms choose to pay cash dividend while other choose to pay cash dividend while others choose to repurchase their stock, and consequently, whether the choice made is in the best interest of the firm’s stockholders (that is, it is a wealth maximizing decisions)
References: Olowe R.A (1997) Financial management concepts, Analysis and capital investment briefly Jones Nigeria ltd, Lagos. Pandey I.M (1983) Financial management 3rd edition. New Delhi vikas publishing. Reyholds, N (2004) Management decision making and stockholder wealth maximization. Chief Oye Akinsulire (2003) Financial management 7th edition ceemol Nigeria ltd, 11 Fowora close Ajao Estate of M/M International Airport Express way Lagos. CHAPTER TWO