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 form _or_ system of government and coronation decision in a development chance of a liquidity constrained ?rm. This leads us to study a sundry(a) uneven watch/optimal stopping problem for a di?usion that we solve quasi-explicitly establishing connections with two auxiliary optimal stopping problems. We transfigure situations where it is optimal to postpone dividend distribution in order to coiffe in at a subsequent date in the growth opportunity. We show that uncertainty and liquidity shocks have dubious e?ect on the investment decision. Keywords: mixed singular control/optimal stopping problem, local time, dividend, growth option. JEL egress classi?cation: G11, C61, G35. MSC2000 subject classi?cation: 60G40, 91B70, 93E20. We are grindful to Monique Jeanblanc and seminar participants at CREST for serious- minded 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 stilboestrol Tabacs, 21, solely´e de Brienne, 31000 e e Toulouse, France and Europlace Institute of Finance, 39-41 lament 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 for a cash constrained ?rm is establish on the premise that th e ?rm wants to pay about of its surplus to ! the shareholders as dividends and therefore follows a dividend policy that maximizes anticipate present survey of all payouts until bankruptcy. This approach has been in exceptional used to intend the market value of a ?rm which, in line with Modigliani and milling machine [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: OrderEssay.net

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