The effect of profitability and liquidity on share repurchase and dividend payout
Journal Title: Zarządzanie i Finanse - Year 2013, Vol 11, Issue 2
Abstract
The aim of this article is to verify hypothesis referring to liquidity and profitability and their effect on share repurchase and dividend payout. The hypothesis states that profitability is more important while deciding on dividend payout, and that liquidity is more important while deciding on share repurchase. To verify this hypothesis author carried out theoretical and empirical studies. To verify this hypothesis, author carried out research for 19 companies listed on Stock Exchange in Warsaw. As a result of this research, it was possible to state that companies paying dividend are in better financial position (have higher profitability and liquidity ratios than average). It means that they are able to pay dividend without any harm for the financial situation. Another result of the research was that companies repurchasing their shares are in worse financial situation (have lower profitability and liquidity ratios than average). It might mean that transferring cash is not the main reason for share repurchasing. It might mean that companies repurchase their shares because they need to stabilize the share price or improve market ratios.
Authors and Affiliations
Elżbieta Bukalska
Keywords
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- EP ID EP152302
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