Impact of dividend on investment decision


An investment decision is viewed as one of the most critical decisions for the growth and survival of companies. However, companies can be influenced by many factors one of them being dividend policy. According to Triani & Tarmid (2019), dividend policy can negatively impact investment decisions in organizations as a result of reduced liquidity and the distribution of a company’s internal resources among shareholders. Evidence also indicates that companies that mitigated their dividend have to provide investment opportunities and are under more financial pressure. Thus it is expected that cash dividend distribution has more negative effects on companies that have reduced their dividend. While the influence of a firm’s dividend policy on the wealth of shareholders remains a debatable issue, it is critical to conduct comprehensive research and provide accurate results based on both primary and secondary data.

Literature Review

Current literature reveals a significant link between dividend policy and critical investment decisions. According to a study conducted by Kusumanisita & Minanti (2021) dividend policy negatively impacts investment decisions because of the distribution of organizations’ internal resources among reduced liquidity and shareholders. The researchers conducted a survey on 20 companies of pharmaceuticals and technology industries in the United States between 2017 and 2020. They found that dividend policy was irrelevant to company value in a capital market. According to their hypothesis, dividend affects cash flows and changes play a crucial role in the collection of data. Dividend changes eventually lead to price changes and provide significant data about future investment and income with no effect on company value. One key explanation is that free cash flows are grounded on the reaction between investors and managers (Tajuddin & Endang, 2017). This suggests that dividend deals with managers’ investment problems by reducing available free cash flows. Thus, the hypothesis for free cash flow indicates that company investment and cash flows are significantly affected by dividend policy.

In another research, Saens & Tigero (2021) shows that companies that controlled their dividend are forced to give more investment opportunities and are under financial pressure. Using the continuous regression model and accounting data, the researchers demonstrate that there are no substantial dissimilarities between the investment decisions made by corporations that disbursing dividends and the ones that fail to pay. Furthermore, the research study results indicate that companies with the more likelihood of paying surplus dividends can significantly invest in more prospects and have more financial constrictions. Therefore, dividend policy impacts investor decisions through mandatory dividend regulation and cash flow privileges of marginal stockholders.

Studies of Ginanjar, Hasnawati & Fiska (2021) show that dividends mitigate the investment problems of managers by minimizing free cash flows available to them. Thus, dividend policy has a significant effect on companies’ cash flows and investments. According to the researchers, capital expenditure is positively and strongly linked to the level of free cash flow. This means that the higher the amount of cash flow a company has, the more investments the company is likely to engage in. Capital expenditure is connected to the influence of free cash flow on capital expenditure since it increases as the size of the firm decreases (Sihwahjoeni, Subiyantoro & Bili, 2020).). Companies tend to maximize their value by making investment decisions and this acts as a motivation to managers owning firm shares and are willing to invest in projects that contribute to their firms which is a future and long-term perspective compared to providing dividends to shareholders.

Bataineh (2020) conducted a study on 3, 800 firms and found that dividends have negative impacts on investment decisions since managers have remained reluctant in cutting dividends and they also view reaching dividends unreachable. The managers argued that they provide investment opportunities as a way of reaching dividends. The researchers also tested whether if dividend cut, increased external investment and reduced investment could provide the expected value of investment and dividend. They found that fewer companies cut their dividend. In similar research, Uzomah & Ihe (2021) found out that fewer organizations cut their dividend while many companies mitigated their investments according to their expected level. They also suggest that dividend is likely to lead to investment problems and has negative impacts on investment decisions in companies.

In another study, Agung, Hasnawati & Huzaimah (2021) found that investment expenditures by companies increased borrowings and led to positive impacts on financial performance. The researchers conducted their study on high-tech companies in China and Taiwan and their causal structures of corporate financial strategies. They employed directed graph models and path analysis and examined the causal relationships among financing, investment corporate performance, and financing dividends. Even though the researchers found that investment expenditures positively impacted financial performance in Taiwan, they also found that the same financial decisions positively affected capital expenditures in China. Bataineh (2020) in his research found that high quality financial reporting mitigated the impacts of dividends on investment designs. The mitigating effect is stronger in firms that have a growth value and R&D investments.

Progress of Data Collection

The data collection plan will focus on listed company’s annual reports detailing their dividends policies. This descriptive accounting research study is applied and correlational according to the objective terms. It is also categorized in the research category of quasi-experimental. Epistemologically, its reasoning and empiricist reasoning is deductive, and using historical information, it is an ex-post study. A plan will be created to visit the companies on the list to be surveyed. The population sample will consist of about 470 companies listed in the stock exchange chart of 2021. After deducting 172 companies and applying restrictions that will modify their activities and change their fiscal year and 65 firms and 52 banks and financial institutions whose fiscal year does not lead to April. Also, 30 firms that do not have a trade gap of over six months and access to information will be excluded from this research. The research population will include 154 firms that have been active since April 2021 and are listed in the stock exchange chart.

Information concerning the theoretical foundations, subject literature, and history of the companies will be collected from publications articles, library resources, internal and external sources, and through the study of books. Data and information needed to test and check the hypotheses will be derived from financial reports and statements submitted to the listed companies. The analysis is based on quantitative and statistical evaluation of the impact of the dividend policy and how it affects the share value, the performance in the stock exchange market for a given type of corporate stock. The research variables will include both dependent and independent variables. The investment will be the dependent variable and it will be obtained by dividend the total acquisition or creation of intangible or fixed assets or other total or long-term assets. The independent variable will be dividend share and it will be obtained through the division of the total ordinary dividend paid by the number of the shares.

Descriptive analysis will be used to provide an overview of the firms under study and the profile of the study through sample data. From here researchers can make conclusions on path analysis and general application. To test the research hypothesis, I will use the panel integration model since the dependent variable is normal and qualitative. Therefore, parametric statistical methods should be used including panel and pooled regression.

Strategy for Completing my Research

To complete my research, I will consider several steps. The first step is choosing my topic of interest, focus, and information. Since the impact of dividends on investment decisions is my topic of interest, I will conduct a preliminary search of information to find out if the existing sources will meet the needs of my research. If I  find too much information, I have to narrow my topic and if the information is limited will broaden my topic. Then, I will conduct thorough research on the topic by skimming through different resources and taking the most reliable. This will help me determine if there is enough data concerning the impacts of dividends on investment decisions and to set out my research context. I will look for the keywords such as dividend, investment decisions, and companies’ at appropriate places such as internet search engines, periodical databases, and catalog books After extensively gathering information, I will revise and expand my working outline and mind map by adding examples, explanations, and information. Next is organizing my research then coming up with research questions and hypotheses. With the chosen resources, I will note the critical information for my paper and identify the research problem.

After identifying the research problem, I must learn more about the problem under investigation. Thus, I have to review related literature. This step will give me foundational knowledge concerning the topic under discussion (Hennessy et al., 2019). Then I will draft my paper using supporting detail to systematically and logically validate my research questions. After completing the draft, I will read, and revise while making sure that all ideas are organized and that they answer the research questions. The last step is will be to proofread my paper and check for grammatical, punctuation, and language errors as well as incomplete sentences and other problems to make my research paper perfect.



















Agung, G., Hasnawati, S., & Huzaimah, R. F. (2021). The Effect of Investment Decision, Financing Decision, Dividend Policy on Firm Value. Journal of Business Management 1(1), 1-12.

Bataineh, H. (2021). The impact of ownership structure on dividend policy of listed firms in Jordan. Cogent Business & Management8(1), 1863175.

Hennessy, E. A., Johnson, B. T., & Keenan, C. (2019). Best practice guidelines and essential methodological steps to conduct rigorous and systematic meta‐reviews. Applied Psychology: Health and WellBeing11(3), 353-381.

Saens, R., & Tigero, T. (2021). Mandatory dividend rules and the investment decision: The case of Chile. The North American Journal of Economics and Finance56, 101373.

Sihwahjoeni, S., Subiyantoro, E., & Bili, M. R. (2020). Analysis Effect of Investment Decision, Financing and Dividend Policy on Value Company with Variable Business Risk as Mediation. International Journal of Research and Scientific Innovation (IJRSI)7(7), 261-269.…

Tajuddin, R., & Endang, K. (2017). The effect of investment decision financing decision dividend payment policy and company size. Journal of Administrative and Business Studies3(2), 105-113. DOI: 10.20474/jabs-3.2.5

Triani, N., & Tarmidi, D. (2019). Firm value: impact of investment decisions, funding decisions, and dividend policies. International Journal of Academic Research in Accounting, Finance and Management Sciences9(2), 158-163. (DOI: 10.6007/IJARAFMS/v9-i2/6107)

Uzomah, I. A., & Ihe, J. (2021). Dividend policy as a determinant for an investment decision. Middle European Scientific Bulletin12, 192-201.

Homework Essay Paper Writers
Calculate your order
Pages (550 words)
Approximate price: -

Why Choose Us

Top Quality and Well-Researched Papers

Top Quality and Well-Researched Papers

We always confirm that writers follow all of your instructions precisely. you'll choose your academic level: highschool, college/university or professional, Your order will be assigned to a writer who possesses a respective degree.

Highly Experienced Paper Writers

Highly Experienced Paper Writers

Our team of professional academic writers has years of vast experience in academic writing, research, and formatting. So you can always be sure that your project is in safe hands.

Free Revisions Essay Writing

Free Unlimited Revisions

If you believe we missed something, feel free to send your order for a free revision. After receipt of the final document, You have 10 days to submit the order for review. A revision can be submitted by logging into your personal account or by contacting our support team.

Timely Assignment Delivery

Timely Delivery and 100% Money-Back-Guarantee

We ensure that all papers are always delivered on the expected time. In any case, if we require more time to polish your paper, we may contact you regarding the deadline extension. In case you are not in a position to allocate additional time, a 100% order refund is guaranteed.

Plagiarism free custom writing

Plagiarism free & Confidential

As part of our quality assurance process, we use several writing tools and checks to ensure that all documents you receive are 100% unique and original.Each paper undergoes careful review by our editors to deliver plagiarism free essays. We also guarantee maximum confidentiality in all of our services.

Real time chat essay writer

Real time online chat with your writer

Our writers and support agents are available 24 hours a day 7 days a week to assist you. We are committed to providing you with top-notch customer experience. Chat with us anytime.

Try it now!

Calculate the price of your order

Total price:

How it works?

Get your paper done in these simple steps

give essay topic

Give your requirements

Fill in the order form and tell us about your assignment, instructions and deadline

pay for essay

Proceed with the payment

Choose your preferred payment method and the writer will start writing your custom paper.

download custom essay

Download the final file

Once your high quality custom paper is ready, we will email it to you.

Our Paper Writing Services

We are here to ensure you dont get stuck with your coursework and assignments. Focus on your hobbies and enjoy some quality leisure time as we write your paper. You can trust our kinds of writing services.

essay writing service essay helper


Essay Writing Service

Stuck with an essay assignment? Making an admission application? We specialize in writing high quality and engaging personal statements as well as application essays. Our professional academic essay writers are experts in writing 100% original essays according to order specifications. From compositions, creative writing to literary analysis we've got you covered.

professional assignment Help assignment writer


Professional assignment Help

Your routine homework and academic assignments are completed on time and at affordable prices. Submit your assignments and the respective subject matter expert will get it done within no time and painlessly. Better grades will be yours without any stress at all!

research paper writing service english essay writer


Research and Term Papers

Every member of our dynamic essay writing team is an expert in academic research. They are all well versed with APA, MLA, Chicago, Harvard citation formats. Your research paper gets to you fully formatted and ready to be submitted. The research involved in writing your paper is always 100% original. This is part of our commitment to provide you with papers free of plagiarism.

custom writing academic writer

Custom Writing

Custom Writing Services

Our highly experienced business, nursing, and psychology writers are true professionals with vast prowess at delivering outstanding work in a wide range of fields. You dont have to worry about Short deadlines anymore. Just give us the instructions and you'll receive your custom paper ASAP! We have fully qualified, full-pro writers on stand by to assist you.