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Going public and the dividend policy of the company ()
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Word Doc
1505
108

Plekhanov Russian Economic Academy

 

The theme of the report:

 

Going public and the dividend policy of the company.

 

By Timofeeva M. V.

 

The supervisor: Sidorova E. E.

 

Moscow 2001.

 

Contents

 

Introduction

 

I. Going Public and the Securities Market3

 

Going Public

 

Types of Shares

 

The Stock Exchange and the Capital Market

 

Procedure for an Issue of Securities

 

Equity Share Futures and Options

 

II. Dividend Policy and Share Valuation

 

Dividends as a Residual Profit Decision

 

Costs Associated with Dividend Policy

 

Other Arguments Supporting the Relevance of Dividend Policy

 

Practical Factors Affecting Dividend Policy

 

Alternatives to Cash Dividends

 

Summary

 

References

 

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15 Introduction

 

In this report we focus on the long-term financing by issuing shares and

dividend policy of the company. We consider the institutional design of

capital market, Stock Market Exchange and Alternative Investment Market;

fundamental theories of paying dividend and factors which influence

Dividend Policy of the companies.

 

The main objective of this report is to develop a better understanding

of the problems faced by start-up firms seeking capital financing and

paying percentage (dividends). In addition, we try to identify the

consequences of shortcoming and overplus of the dividend payouts for

value of corporation (for value of share) and individuals

(shareholders).

 

The urgency of this question is obvious, because firms need capital to

finance product-development or growth and must, by a lot of factors

(interest rate, time period and etc), obtain this capital largely in the

form of equity rather than debt. So the issuing of shares and dividend

policy is one of the widest research overseas and I hope Russian

economists dont be backward in that list.

 

I. Going Public and the Securities Market

 

Going Public

 

Most private companies that experience the rapid growth have reached the

stage when existing shareholders private resources are exhausted,

retained profit is insufficient to cope with the rate of expansion, and

further borrowing on top of your current amount of loans will probably

be resisted by lenders until you have a more substantial layer of equity

capital. One solution to this financial problem is to retain the

services of a financial intermediary usually a merchant bank to find

a few private individuals or financial institution such as an insurance

company or an investment trust that is willing to subscribe more

capital. This is known a private placing. And, of course, there are some

advantages and disadvantages of going public.

 

Advantages

 

access to the capital market and to larger amounts of finance becomes

possible by having shares quoted on the Stock Exchange;

 

institutions are more likely to invest on the public listed company, and

additional borrowing becomes possible;

 

shareholders will find it easier to sell their shares in the wider

market;

 

the company attains a higher financial standing;

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