Level of Debt and Dividend Policy of Hoad Limited - Case Study Example

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The research “Level of Debt and Dividend Policy of Hoad Limited” is expected to look into an alternative capital source for the company and analyze the impacts of dividend policy and level of debt on the value of the firm. The firm has been operating under economy with an under-developed stock of exchange…
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Level of Debt and Dividend Policy of Hoad Limited
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Download file to see previous pages The company’s investment decision was influenced by high diversification costs, making it avoid financial market use. The technological adjustment is therefore limited as the company ends up choosing production technologies that are less capital intensive subject to short-term risk. The company was therefore unable to adjust up to the latest technologies which were more capital intensive. The under-developed stock exchange market prevents the company from structuring their financial packages optimally (Levine, 2002). Conflicts of interest usually exist between the managers of the firms and its suppliers and customers, and also between different firm investors.
Head Company if having high debt levels had increased its possibility of bankruptcy sufficiently which may put them into risky projects harming their creditors. The company, if highly leveraged, could be unable to get additional credit due to incentives created by debt financing to the taking of greater risks. Availability of well-developed stock of market exchange would allow for equity issuance. This issuance would mitigate problems of incentives providing room for more borrowing to the company. The stock market has always played an important role in the provision of information. A well-developed stock markets gather information concerning prospects of companies that had their shares traded availing. The achievement of this goal is usually through provision of fair payments to the shareholders. Dividend policy appears in the top ten finance puzzles. Two types of dividend policy known to an economist are residual and managed dividend policy.   ...Download file to see next pagesRead More
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