Impact of dividend policy and firm characteristics on firm value: A study on publicly listed service sector entities in the Philippines for the period of 2006-2010

Various studies have intended to analyze the effect of dividend policies in the firm’s value, most of these were conducted using the Dividend Irrelevance Theory, which believes that dividend policies will not affect firm value, while some proved the validity of Gordon’s Model of the Dividend Relevance Theory, a model that explores dividend policies in relation to firm’s growth; this study, on the other hand, focused on determining the impact of dividend policy and other firm characteristics to firm value using the Walter’s Model of Dividend Relevance Theory, a model which states that dividend policies has significant effect on firm value. The group has identified the firm’s characteristics along with the dividend policy to be the exogenous variables in the first model of this study, these are: liquidity, growth, profitability, firm age, firm size and leverage. The second model’s exogenous variables that defined dividend policy, on the other hand, are: cost of capital and rate of return. The group has chosen the service sector among the six sectors listed in the Philippine Stock Exchange to be the focus of this study. In the examination of the factors we have identified, qualitative measures and considerations will be ignored with regards to measurement, for the purpose of computations