OPTIMAL DIVIDEND POLICY AND STOCK PRICES

We model a corporation dividend as an exchange option on stochastic cash flow and capital budge. Then we solve optimal dividend policy problem completely based on the dividend model under the assumption that the cash reservoir of a corporation follows a mean reverting process from empirical evidence and economic arguments. Our optimal dividend controls depend on explicitly with the cash flow and the capital budget of the corporation, and maximizes the HARA utility performance. We specify the unique optimal dividend control for the cash flow and the capital budge. Multiplicity or absence of optimal dividend policies are given. The stock price of the corporation is studied in terms of our stochastic dividend model. We find an explicit relation among the volatility of the stock price, the volatility of the cash flow and the volatility of the capital budget. The ex-dividend stock price is positively proportional to the stochastic cash flow and the probability of the dividend delta with respect to the cash flow, and negatively proportional to the capital budget and the probability of the dividend delta with respect to the capital budget. Hence, our approach provides another passage through which countercyclical volatility of the stock price can arise from the countercyclical cash flow and capital budget directly.

Ukuran Perusahaan Memoderasi Pengaruh Free Cash Flow dan Leverage Terhadap Kebijakan Dividen

Determining the optimal cash dividend policy a company should consider several factors. An optimal dividend policy is required because it can create a balance between dividends and current growth in the next period. The purpose of this study is to obtain empirical evidence on the effect of free cash flow and leverage on dividend policy and firm size capability in moderating the effect of free cash flow and leverage against dividend policy. Companies going public listed on the Indonesia Stock Exchange (BEI) year 2013-2017 is the location of research with purposive sampling as a method of determining the sample. Companies that meet the criteria are 10 companies with a total of 39 observations. Moderated Regression Analysis (MRA) was used to test in this research. The result showed that free cash flow had positive and leverage effect negatively on dividend policy. The study also found that firm size is able to strengthen the effect of free cash flow on dividend policy and weaken the influence of leverage on dividend policy. Keywords: dividend policy, free cash flow, leverage, company size..

EQUILIBRIUM EQUITY PRICE WITH OPTIMAL DIVIDEND POLICY

This paper proposes an equilibrium model for evaluating equity with optimal dividend policy in a jump-diffusion market. In this model, a representative investor having power utility over an aggregate consumption process evaluates the equity as the expected value of the discounted dividends with his stochastic discount factor, while a firm paying the dividends from its own cash reserves manages to maximize the equity price. This situation is formulated as a singular stochastic control problem of jump-diffusion processes. We solve this problem and give the equilibrium equity price and the optimal dividend policy. Numerical examples show that the aggregate consumption process and the investor’s risk aversion have a significant impact on the equity price and the dividend policy. This model provides a structural explanation of equity risk premiums that is consistent with the standard theory of asset pricing.