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![Harmonized Index of Consumer Prices (HICP): All Items (dotted line) and Pharmaceutical Products (continuous line) for the European Union (27 from 2020) (2015 = 100). Source: Data retrieved from Eurostat [111]](publication/362963011/figure/fig2/AS:11431281159976254@1684548160555/Harmonized-Index-of-Consumer-Prices-HICP-All-Items-dotted-line-and-Pharmaceutical.png)
Harmonized Index of Consumer Prices (HICP): All Items (dotted line) and Pharmaceutical Products (continuous line) for the European Union (27 from 2020) (2015 = 100). Source: Data retrieved from Eurostat [111]
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This paper examines dividend policy issues in the European pharmaceutical industry. This sector is of particular interest because of the high research and development expenditures and the associated risks characterizing the business models of many firms in this industry. In fact, from the perspective of corporate finance theory, this is a particula...
Citations
... In this regard, the overall motivation of this study is to examine, from a theoretical point of view, the effect of inflation and risks on future dividends, using one and multiple factors, as well as one and multiple periods. This point of view is consistent with the position of Basse et al. (2023) who noted that in spite of numerous research efforts (related to dividends) there still seems to be no clear picture (see also Mazouz et al. 2023). Moreover, as noted by Ali and Hegazy (2022) "Theoretically, the existing literature has little to say about the relation between dividend policy and risk.ˮ ...
In this paper, we examine the theoretical relationship between inflation, risk, and dividend growth. Our model development is based on the standard definition of the expected real dividend growth rate. Our first result indicates that the expected dividend growth of a firm is positively and linearly related to its inflation-dividend beta (obtained from the covariance between the inflation rate and the company’s dividend growth rate). Our second result demonstrates that this relationship can easily be extended to a multifactor model, using the different factors that influence inflation. Our third result shows that the latter relationship can also be extended to a long-run projection. These findings suggest that inflation affects dividends. The findings also suggest that risk, estimated with dividends, inflation and economic factors, influences dividend growth rates, in the short and long-run.
... However, the supporter of the relevancy theory states that increasing dividends fosters an ideal environment for management to secure additional funds from external sources to support new projects. To attract more funds, a company must have favorable information for market participants, including investors (Basse et al., 2023). On the other hand, obtaining additional funds from outside sources results in floatation costs, raising the company's cost of capital. ...
... Similarly, distribution of income as dividend might be affected by the nature of business. The study of Basse et al. (2023) revealed that the industry such as pharmaceutical which requires large funds for research and development. These types of firms has been negative affect of dividend on firm's ability finance new investment and research and development projects. ...
... The study theorized that dividend payout ratio affects corporate performance in the short term but benefits it in the long term. Basse et al. (2023) analyzed how dividend payouts impact a pharmaceutical company's capacity to fund new initiatives and research and development using data from the European pharmaceutical sector. The data set was acquired from Bloomberg and spans from 2002Q1 to 2020Q4. ...
The strategy of dividend policy implementation in the context of business value growth is the subject of debates in theoretical and empirical research. Dividends and retained earnings are two alternatives that investors have when deciding how to distribute their income. According to the bird-in-the-hand theory, a company’s value is maximized by paying large dividends, because investors consider the payouts less risky than capital gains, regular high dividend payments serve as an information signal to market participations about the current and future financial stability, which attracts new investors and allows attracting more external resources. Instead, according to Miller and Modigliani’s dividend irrelevancy theory, corporate value is influenced not by the division of income into dividends and retained earnings, but by investment policy and income from assets. There is a lack of research in the literature that examines the relationship between dividend payouts and stock prices in developing countries (especially in Nepal) and there is no empirical evidence that profitability can moderate this relationship. The article examines the influence of dividend yield, retention ratio and dividend payout ratio on share price both in general and directly, and indirectly-through return on assets and return on equity. The information base is data for the 2017-2021 financial years on 61 Nepalese microfinance institutions (10 of which were the direct object of the study) registered on the Nepal Stock Exchange (NEPSE), obtained from the official websites of the relevant institutions, ShareSansar and NEPSE statistics. SPSS software (PROCESS v4.3) was used for data analysis. Descriptive statistics, the correlation and regression analysis were used for the analysis. The article analyzes three types of effects: total, direct and indirect. The overall effect of dividend yield on share price is negative, the retention ratio is positive and significant, and the dividend payout ratio is negative and significant. The direct effect of the dividend yield on the stock price is negative, the retention ratio and the dividend payout ratio are positive and insignificant. The indirect effect of dividend yield and retention ratio on share price through return on assets is negative and insignificant, and through return on equity it is positive and significant. The indirect effect of the dividend payout ratio through the return on assets is positive and significant. However, the return on shareholders’ capital has a negative and insignificant effect on the share price.
