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The article written by Chazi et al. (2010) contributes to the need to establish the reality of dividend policy. Theoretically, the authors reveal that many companies tend to pay dividends, but the strategy towards this process remains a puzzle. By examining this tendency in emerging markets with a free tax environment, the article uses a survey to disclose the program’s conservative nature. Besides, the authors reveal a dividend program vital for those investors looking for stable income. Some managers use the dividend method to handle the aspects of trade-offs, while for analysts, the strategy can be useful to apply as a valuation tool. Therefore, the research confirms that this approach is important in businesses.
The article is investigative, as the authors utilized survey methodology, a sample, and then made a summary of the gathered statistical data. The main intention was to stage an acquisition from financial executives on their perception of using dividend policy.
Therefore, administration of the questionnaire was essential in ensuring the objective is achieved. However, the survey used self-help data, which the authors reveal uses honesty from the respondents and CFOs’ accuracy to make conclusions. Based on the information provided in the article, the two dividend policy determinants are taxes and clienteles. In the United Arab Emirates (UAE), there are no dividends and corporate taxes. Still, in a tax-free environment, almost 42.45 percent of the UAE executives agreed to be paying dividends for the sake of attracting retail investors. This information is important in revealing the need to pay taxes as dictated by the environment.
Therefore, the results explain the aspect of dividend policy in practice for the UAE and the U.S. firms. The majority of the 28 participants of this study agreed that dividends are influential; however, managers still opt to use a long-term payout ratio when determining the dividend rule because it is a conservative tool. Most of the UAE firms consider this approach the one which provides residual cash flow and therefore determines investment decisions. In the U.S., however, repurchase occurs under the influence of this strategy in residual cash flow.
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