Examining the Effect of Corporate Dividend Policy on Shareholder Wealth Maximization and Market Valuation

Posted: Aug 26, 2023

• Evelyn Perez
• Evelyn Scott
• Evelyn Young

Abstract

The relationship between corporate dividend policy and shareholder wealth maximization represents one of the most enduring puzzles in financial economics. Since Miller and Modigliani's seminal work on dividend irrelevance under perfect market conditions, researchers have grappled with understanding why dividend policies appear to significantly influence firm valuation in real-world markets. Traditional approaches to this question have largely relied on linear regression models and event study methodologies, which while valuable, fail to capture the complex, dynamic interactions between dividend decisions, investor behavior, and market conditions. This research introduces an innovative computational framework that moves beyond conventional methodologies to examine dividend policy effects through a multi-dimensional lens that integrates behavioral finance, machine learning, and network analysis.