Theoretical Models of Dividend Policy

Abstract

Why do modern corporations pay  dividends and how does dividend policy  affect company’s performance remain  controversial theoretical questions in both  developed and emerging markets. This paper  aims to describe concepts and empirical  evidence about three of the most widely  discussed theories: namely the theory of the  dividend payment preference, the theory of  irrelevance, and the theory of tax benefits  from profit reinvestment. This is a preliminary  stage of a study of the dividend policy of  publicly traded companies in Bulgaria. By  using these theories the future research of  data will be based on the achievements of  world science and the applied models will  be comparable with the results obtained in  other countries.