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Model of Deferred Advantage or Disadvantage from Reinvestment - Methodical Problems

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  • Petr Marek

Abstract

The article deals with methodical problems connected with model of deferred advantage (or disadvantage) from reinvestment. The advantage shall be understood as a difference in shareholder’s wealth resulting from the situation when the corporate profits are ploughed back into business operations rather than distributed among shareholders in form of dividends. If negative figures are the case, it is dealt with deferred disadvantage. Main methodical problems represent a) form of shareholder’s income (dividend payment versus capital gains), b) number of periods, c) fixed versus proportional return on capital, and d) tax aspects. On base of Masulis and Trueman paper (1988) optimal dividend payout ratio was also proposed.

Suggested Citation

  • Petr Marek, 2008. "Model of Deferred Advantage or Disadvantage from Reinvestment - Methodical Problems," Český finanční a účetní časopis, University of Economics, Prague, vol. 2008(3), pages 20-26.
  • Handle: RePEc:prg:jnlcfu:v:2008:y:2008:i:3:id:277:p:20-26
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    References listed on IDEAS

    as
    1. Masulis, Ronald W. & Trueman, Brett, 1988. "Corporate Investment and Dividend Decisions under Differential Personal Taxation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(04), pages 369-385, December.
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    More about this item

    Keywords

    Dividenda; Dividend policy; Dividendová politika; Dividend; Model of deferred advantage or disadvantage from reinvestment; Model odložené výhody resp. nevýhody z reinvestování;

    JEL classification:

    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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