Question

Would you set different dividend policies based on the perceived demographic of your investor? Does the...

Would you set different dividend policies based on the perceived demographic of your investor? Does the firm's life cycle impact this decision?

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Answer #1

Answer)

A company sets a different dividend policy based on the perceived demographics of the investor this is due to the reason that shareholders influence the dividend policy of the company.

If the shareholders are of young age, they do not want more dividend as they have current source of income. They would rather like the company to invest the funds and grow at a higher rate.

On the other hand if the shareholders are of older age they demand higher dividends as they have no or little source of income.

The firm cycle also has a huge part to play in this because if a company is in growth stage then it will invest more and pay lesser divided so that company can grow. On the other hand if the company is at maturity stage, then it will rather try to distribute more dividends to the shareholders.

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