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| Author: | Ghosh, C. |
| Title: | A Regret-theoretic explanation of corporate dividend policy. |
| Journal: | Journal of Business Finance and Accounting
1993 : JUN, VOL. 20:4, p. 559-573 |
| Index terms: | DIVIDEND POLICY MOTIVATION UNCERTAINTY MANAGERS |
| Language: | eng |
| Abstract: | This paper uses Regret Theory to explain some survey results on managers' dividend policy decisions under uncertainty. Regret Theory suggests that an individual decision is influenced by potential post-decision regret (pride) he feels on his inability (ability) to select the option with the best outcome. Author argues that (1) the decision to pay dividends and simultaneously raise venture capital from external sources is attributable to managerial aversion for regret at the failure of a risky investment opportunity implemented with internal funds generated by a conservative dividend policy; and (2) the decision to support dividends with borrowed funds is motivated by the prospect that an improvement in the firm's financial condition will make the managers proud that their judgement has helped avert a potential crisis for the firm. |
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