What Policies can be followed in Practice by Corporate Finance Managers?
According to Asquith and Mullins (1986) a study of 258 companies on the period 1970-1979 listed on the French market; they arrived at the conclusion that there are six variations of the distribution policy of dividends:
Alternative A is the result of political the adoption of a dividend strictly proportional to the benefits per share for the year (Asquith and Mullins 1986, p. 69). A close variation of it is the Alternative B, which without being proportional to the earnings per share annual dividend evolves in the same direction as the latter. At first these two variants is associated with a characteristic essential behavior of business leaders concerned: Indeed, it is accepted by them because of the “pass” or a more dividends in the event of adverse results the company (p. 72).
It should however be opposed to this first type of behavior, one characterized by a reluctance to “pass” or even a single dividend. The study shows the effect of the 258 companies studied over the period 1970-1979 more half had passed a dividend, in spite of difficulties related to the crisis which had to face many of them. Variants C, D, E and F correspond to as many variations of such behavior to a certain level of regulation annual dividend.