1、外文文献翻译译文 一、外文原文 原文： Dividend policy Profitable companies regularly face three important questions: (1) How much of its free cash flow should it pass on to shareholders? (2) Should it provide this cash to shareholders by raising the dividend or by repurchasing stock? (3) Should it maintain a stable,
2、consistent payment policy, or should it let the payments vary as conditions change? When deciding how much cash to distribute to shareholders, finance manager must keep in mind that the firms objective is to maximize shareholder value. Consequently, the target pay rate ratiodefine as the percentage
3、of net income to be paid out as cash dividendsshould be based in large part on investors preference for dividends versus capital gains: do investors prefer (1) to have the firm distribute income as cash dividends or (2) to have it either repurchase stock or else plow the earnings back into the busin
4、ess, both of which should result in capital gains? This preference can be considered in terms of the constant growth stock valuation model:gDS 1 If the company increases the payout ration, the raises 1D .This increase in the numerator, taken alone, would cause the stock price to rise. However, if 1D
5、 is raised, then less money will be available for reinvestment, that will cause the expected growth rate to decline, and that will tend to lower the stocks price. Thus, any change in payout policy will have two opposing effects. Therefore, the firms optimal dividend policy must strike a balance betw
6、een current dividends and future growth so to maximize the stock price. In this section, we examine three theories of investor preference: (1)the dividend irrelevance theory, (2)the bird-in-the-hand theory ,and(3) the tax preference theory. DIVIDEND IRRELEVANCE THEORY It has been argued that dividen
7、d policy has no effect on either the price of a firms stock or its cost of capital. If dividend policy has no significant effects, then it would be irrelevance .The principal proponents of dividend irrelevance theory are Merton Miller and Franco Modigliani(MM).They argued that the firms is determine
8、d only by its basic earning power and its business risk. In other words, MM argued that the value of firm depends only on the income produced by its assets, not on how this income is split between dividends and retained earnings. To understand MMs argument that dividend policy is irrelevance, recogn
9、ize that any shareholder can in theory construct his or her own dividend policy .If investors could buy and sell shares and thus create their own dividend policy without incurring costs, then the firms dividend policy would truly be irrelevant. Note, though, that investors who want additional divide
10、nds must incur brokerage cost to sell shares, and investors who do not want dividends must first pay taxes on the unwanted dividends and then incur brokerage cost to purchase shares with the after-tax dividends. Since taxes and brokerage costs certainly exist, dividend policy may well be relevant. I
11、n developing their dividend theory, MM made a number of assumptions especially the absence of taxes and brokerage costs. Obviously, tax and brokerage costs do exist, so the MM irrelevance theory may not be true. However, MM argued that all economic theories are based on simplifying assumptions, and
12、that the validity of a theory must be judged by empirical test, not by the realism of its assumptions. BIRD-IN-THE-HAND THEORY The principal conclusions of MMs dividend irrelevance theory is that dividend policy does not affect the required rate of return on equity, Ks. This conclusion has been hotl
13、y debated in the academic circles .In particular, Myron Gordon and John Lintner argued that Ks decreases as the dividend payout is increase because investor are less certain of receiving the capital gains which are supposed to result from retaining earnings than they are of receiving dividend paymen
14、ts MM disagreed .They argued that Ks independent of dividend policy, which implies that investors are indifferent between D1/P0 and g and, hence, between dividends and capital gains. MM called the Gordon-Lintner argument the bird-in-the-hand fallacy because, in MMs view, most investors plan to reinv
15、est their dividends in the stock of the same or similar firms, and, in any event, the riskiness of the firms cash flows to investors in the long run is determined by the riskiness of operating cash flows, not by dividend payout policy. TAX PREFERENCE THEORY There are three tax-related reasons for th
16、inking that investors might prefer a low dividend payout to a high payout: (1) Recall from Chapter II that long-term capital gains are taxed at a rate of 20 percent, whereas dividend income is taxed at effective rates which go up to 39.6 percent. Therefore, wealthy investors might prefer to have com
17、panies retain and plow earnings back into the business. Earnings growth would presumably lead to stock prices increases, and thus low- taxed capital gains would be substituted for higher-taxed dividends. (2)Taxes are not paid on the gains until a stock is sold. Due to time value effects, a dollar of
18、 taxes paid in the future has a lower effective cost than a dollar paid today. (3) If a stock is held by someone until he or she dies, no capital gains tax is due at all-the beneficiaries who receive the stock can use the stocks value on the death day as their cost basis and thus completely escape t
19、he capital gains tax. Because of these tax advantages, investors may prefer to have companies retain most of their earnings. IF so, investors would be willing to pay more for low-payout companies than for otherwise similar high- payout companies. There three theories offer contradictory advice to co
20、rporate managers, so which, if any, should we believe? The most logical way to proceed is to test the theories empirically. Many such tests have been conducted, but their results have been unclear. There are two reasons for this(1)For a valid statistical test, things other than dividend policy must
21、be held constant； that is, the sample companies must differ only in their dividend policies, and(2)we must be able to measure with a high degree of accuracy each firms cost of equity. Neither of these two conditions holds: We cannot find a set of publicly owned firms that differ only in their dividend policies, nor can we obtain
