Eagles Electronics Case
Eagles Electronics Company Analysis
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Table of Contents
Table of Contents 2
Introduction 2
Events in product market that could influence the share price of the Eagles Electronics 3
Events in capital market that could influence the share price of the Eagles Electronics 3
Sources of capital available to Eagles Electronics 3
Strategies to enhance share price value of Eagles Electronics 4
Residual theory of dividends 9
Reasons why sometimes firms opt for dividend cuts 9
Impact of dividend cut on Eagles Electronics 10 Impact of takeover of the company (Benefits) 13
Assessing impact of takeover of produtos compostos by eagles electronics 14
Conclusion 15
References 17 …show more content…
Firms are reluctant to opt for dividend cuts and they only do so under extreme circumstances (Roberts, 2008).
Residual theory of dividends
Divicut is a case where the company is forced to retain funds through lack of alternative financing options, with the explicit assumption that the firm is capital-rationed with access only to internal sources of finance. Dividends should be paid only when there are no further worthwhile investment opportunities. Having decided on the optimal set of financing, the firm should distribute to shareholders only those funds not required for investment financing (Modigliani & Miller, 1961)
Reasons why sometimes firms opt for dividend cuts Dividend omissions are strategically motivated to preserve financial flexibility within the firm and violations of company covenants, as dividend cuts occur frequently even among healthy firms and are not necessarily indicator of financial distress (Bulan, 2009). Brockman & Unlu (2009) point out that countries with weaker creditor rights, firms adopt more restrictive payout policies in order to mitigate the agency cost of …show more content…
(1997) The art of mergers and acquisition integration: a guide to managing resources. New York, NY. McGraw-Hill
Amihud, Y. (2002) Illiquidity and stock returns: cross section and time-series effects. Journal of financial markets, 5, pp. 31-56. Breale, M. & Franklin, A. (2000) Principles of corporate finance: mergers and takeovers. New York, NY: McGraw-Hill
Chava, S. & Michael, R. (2008) How does financing impact investment: the role of debt covenants. Journal of finance, 63, pp. 2085-2121
Cremers, N. & Kose, J.2009, Takeovers and cross-section of returns: Review of financial studies, 22, pp. 1409-1445
DeAngeleo, H. & Douglas, J. (1992) Dividends and losses, Journal of finance, 47, pp. 183-863
Fama, F. & French, R. (2001) Disappearing dividends: changing firm characteristics, Journal of financial economics, 60, pp. 3-44.
Giroud, X. & Holger, M. (2010) Does corporate governance matter in competitive industries, Journal of financial economics, 95, pp. 312-331
Hackbarth, D. & Erwan, M. (2008) Stock returns in mergers and acquisition, Journal of finance, 63, pp. 1213-1252.
Jensen, M. (1986) Agency costs of free cashflow corporate finance and takeover, The American Economic Review, 76(2), pp.
Name:
Course:
Tutor:
Date:
Table of Contents
Table of Contents 2
Introduction 2
Events in product market that could influence the share price of the Eagles Electronics 3
Events in capital market that could influence the share price of the Eagles Electronics 3
Sources of capital available to Eagles Electronics 3
Strategies to enhance share price value of Eagles Electronics 4
Residual theory of dividends 9
Reasons why sometimes firms opt for dividend cuts 9
Impact of dividend cut on Eagles Electronics 10 Impact of takeover of the company (Benefits) 13
Assessing impact of takeover of produtos compostos by eagles electronics 14
Conclusion 15
References 17 …show more content…
Firms are reluctant to opt for dividend cuts and they only do so under extreme circumstances (Roberts, 2008).
Residual theory of dividends
Divicut is a case where the company is forced to retain funds through lack of alternative financing options, with the explicit assumption that the firm is capital-rationed with access only to internal sources of finance. Dividends should be paid only when there are no further worthwhile investment opportunities. Having decided on the optimal set of financing, the firm should distribute to shareholders only those funds not required for investment financing (Modigliani & Miller, 1961)
Reasons why sometimes firms opt for dividend cuts Dividend omissions are strategically motivated to preserve financial flexibility within the firm and violations of company covenants, as dividend cuts occur frequently even among healthy firms and are not necessarily indicator of financial distress (Bulan, 2009). Brockman & Unlu (2009) point out that countries with weaker creditor rights, firms adopt more restrictive payout policies in order to mitigate the agency cost of …show more content…
(1997) The art of mergers and acquisition integration: a guide to managing resources. New York, NY. McGraw-Hill
Amihud, Y. (2002) Illiquidity and stock returns: cross section and time-series effects. Journal of financial markets, 5, pp. 31-56. Breale, M. & Franklin, A. (2000) Principles of corporate finance: mergers and takeovers. New York, NY: McGraw-Hill
Chava, S. & Michael, R. (2008) How does financing impact investment: the role of debt covenants. Journal of finance, 63, pp. 2085-2121
Cremers, N. & Kose, J.2009, Takeovers and cross-section of returns: Review of financial studies, 22, pp. 1409-1445
DeAngeleo, H. & Douglas, J. (1992) Dividends and losses, Journal of finance, 47, pp. 183-863
Fama, F. & French, R. (2001) Disappearing dividends: changing firm characteristics, Journal of financial economics, 60, pp. 3-44.
Giroud, X. & Holger, M. (2010) Does corporate governance matter in competitive industries, Journal of financial economics, 95, pp. 312-331
Hackbarth, D. & Erwan, M. (2008) Stock returns in mergers and acquisition, Journal of finance, 63, pp. 1213-1252.
Jensen, M. (1986) Agency costs of free cashflow corporate finance and takeover, The American Economic Review, 76(2), pp.