Aharony and Swary (1980) examined the influence of dividend policy and profit policy on stock price based on 149 listed companies in NYSE paying cash dividend to shareholders. The research concludes that the dividend is in direct relation with stock price, while the influence of profit policy on market is less significant than dividend policy. One thing special about this research is that it eliminates the sample data in 11 days between profit announcement date and dividend announcement date.
Through questionnaire, Lintner (1956) conducted survey on the financial managers in 600 listed companies in U.S., and carried out analysis based on research result. According to the research, Lintner believes that dividend policy of listed companies can convey the company’s profit information to the market. In addition, stock price is in direct correlation with payout ratio. This depicts that the higher the payout ratio is, the higher the stock price will be. On the other hand, a higher stock price will contribute to greater company value. This paper also explained why some enterprises prefer dividend distribution to stock repurchase. The reason why companies distribute their dividend is to attract more organization investors, which can supervise listed companies to ensure that the latter can stand an edge in management.
Gordon (1959) believes that when purchasing stock, investors will take three factors into consideration, which are retained earnings and capital gain. The third factor is a combination of both. Through analyzing the relationship among derived variables in each case to study the change of stock price. In addition, the conclusion of this paper will also be examined through analyzing the sample data in cross section. This paper will come to the conclusion that retained earnings will bring more uncertainty to investors, therefore, investors prefer stock dividend instead of capital earnings.
Taking listed companies paying cash dividend in NYSE during 1947 and 1968 as samples, Charest (1978) carried out his analysis through even study approach. Charest believes that the change of the payment level of cash dividend can effectively convey information to the market, with a higher payment level of cash dividend leading to increase in stock price. However, Charest did not eliminate other factors that might lead to change in stock price in his research.