The Dynamics Between Dividends, Financing and Investments: Evidence From Jordanian Companies

Abstract

<jats:p>Dividend decisions, Financing decisions and Investment decisions are three very imperative decisions taken by a firm. The effect of these decisions is on the performance of the firm which subsequently effects the valuation of the firm. These decisions in a firm are also influenced by the growth and status of the respective economy.The current research attempts to analyze the dynamics between these three major decision areas and also assess their relationship with the market value of the firm. These dynamics are further tested against the economic growth of the respective economy. Annual data for 50 companies from Jordanian economy for the time period 2007-2018 is used to achieve the objective. Basic and advanced statistical techniques such as regression analysis and Vector Auto Regression (VAR) have been used in the study. The sample involved 50 Jordanian companies.The study found that the value of the firm is affected by three key decisions (value drivers) of dividend, investment and financing and this effect is best measured at a lag of two years. Also the combined effect of the three value drivers is more than standalone effect.</jats:p>

Investment Decisions of Energy Sector Companies on the Indonesia Stock Exchange: Theory and Evidence

“…In this case, investment spending provides a positive signal about the company's growth so that it can increase firm value. This statement is supported by several studies which have found that investment decisions have an effect on firm value (Al Daas et al, 2020;Pramartha et al, 2020;Susanti et al, 2019). Thus, we propose this hypothesis [1]:…”

“…Information on the company's investment decisions is a signal that the company has good growth opportunities or prospects so that it is expected to increase share prices and the prosperity of shareholders. Several studies have proven that investment decisions are a positive signal in improving the company, such as in a study conducted by Al Daas et al (2020) which explains that one of the focuses of the driver of firm value in Jordan is related to investment decisions. This is also similar to the findings by Pramartha et al (2020) that investment decisions have a positive effect on firm value but with a different object, which is BUMN companies listed on the Indonesia Stock Exchange.…”

“…On the other hand, the values in the parentheses stand for the values of the standard error. CEM: Common effect model, FEM: Fixed effect model, REM: Random effect model, PER: Price to earnings ratio, ROE: Return on equity, PBV: Price to book value, DER: Debt to equity, GDP: Gross domestic product, LR: Likelihood ratio with previous studies, such as those by AlDaas et al (2020),…”

Impact of Elimination of Dividend Distribution Tax on Indian Corporate Firms Amid COVID Disruptions

“…Dividend, financing, and investment decisions are crucial corporate finance decisions which influence a firm's value (Daas et al 2020). The proponents of residual theory avow the dividend as a passive residual (Brav et al 2005;Higgins 1972).…”