Optimal Dividend Policy

Optimal Dividend Policy and Growth Option Jean-Paul D´camps† St´phane Villeneuve‡ e e June 2005 ? Abstract We analyse the interaction between dividend indemnity and coronation decision in a development prospect of a liquidity constrained ?rm. This leads us to study a sundry(a) particular(a) watch/optimal stopping problem for a di?usion that we solve quasi-explicitly establishing connections with two auxiliary optimal stopping problems. We diversify situations where it is optimal to postpone dividend distribution in order to set about in at a subsequent date in the growth opportunity. We show that uncertainty and liquidity shocks have indeterminate e?ect on the investment decision. Keywords: mixed singular control/optimal stopping problem, local time, dividend, growth option. JEL outcome classi?cation: G11, C61, G35. MSC2000 subject classi?cation: 60G40, 91B70, 93E20. We are diffraction gratingful to Monique Jeanblanc and seminar participants at CREST for profound discussions and suggestions. fiscal Support from the Fonds National de la Science is grate widey acknowledged. We inhabit solely responsible for the content of this paper. † GREMAQ-IDEI, Universit´ de Toulouse 1, Manufacture diethylstilboestrol Tabacs, 21, solely´e de Brienne, 31000 e e Toulouse, France and Europlace Institute of Finance, 39-41 repent Cambon, 75001 Paris, France. electronic mail: decamps@cict.fr.

‡ GREMAQ, Universit´ de Toulouse 1, Manufacture des Tabacs, 21, All´e de Brienne, 31000 Toulouse e e Email: stephane.villeneuve@univ-tlse1.fr. ? 1 Introduction look on optimal dividend payouts f or a cash constrained ?rm is establish on th! e premise that the ?rm wants to pay about of its surplus to the shareholders as dividends and therefore follows a dividend policy that maximizes anticipate present set of all payouts until bankruptcy. This approach has been in exceptional used to hear the market value of a ?rm which, in line with Modigliani and miller [19], is de?ned as the present value of the append of future dividends. In di?usions...If you want to get a full essay, order it on our website: BestEssayCheap.com

If you want to get a full essay, visit our page: cheap essay