Impact of Dividend Policy on Firm Profitability: Case of British American Tobacco (BAT)

 Impact of Dividend Policy on Firm Profitability: Case of British American Tobacco (BAT)
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Dividend Policy & Firm Performance2
Table of Contents
Abstract........................................................................................................................................... 3
Chapter 1: Introduction................................................................................................................... 4
1.1. Research Background....................................................................................................... 4
1.2. Aim and Objectives.......................................................................................................... 4
1.3. Research Question............................................................................................................ 5
1.4. Structure of the Proposal.................................................................................................. 5
Chapter 2: Literature Review.......................................................................................................... 6
2.1. Relationship between Dividend Policy and Profitability................................................. 6
2.2. M&M Theory ................................................................................................................... 6
2.3. Signalling Theory............................................................................................................. 6
2.4. Empirical Evidence .......................................................................................................... 7
Chapter 3: Research Design and Methodology .............................................................................. 9
2.5. Research Paradigm........................................................................................................... 9
2.6. Research Approach .......................................................................................................... 9
2.7. Research Design............................................................................................................... 9
2.8. Data Collection Method ................................................................................................. 10
2.9. Accessibility Issues........................................................................................................ 10
2.10. Data Analysis Plan...................................................................................................... 11
2.11. Ethical Issues.............................................................................................................. 11
2.12. Research Schedule...................................................................................................... 12
References..................................................................................................................................... 13
Dividend Policy & Firm Performance3
Abstract
This study aims to study the relationship between dividend policy and profitability of a company.
This will be a case study research and aims to provide and add to existing empirical evidence by
focusing on the dividend policy and profitability of British American Tobacco and studying the
relationship between the two variables in general and in the context of the selected company.
This study will be based on the positivist paradigm because the phenomenon under consideration
is quantifiable and subject to hypothesis testing. This study will be based on deductive reasoning
as it uses existing theories about the relationship between dividend policy and profitability and
then continues to test the theories in specific circumstances, i.e.,by applyingthem on the case
study of British American Tobacco. The research design of this study would be a quantitative
method based on case study strategy. The study will collect financial information and data from
annual statements of British American Tobacco. Finally, the study will use financial ratio
analysis to study the trends between dividend pay-outs and profitability.
Dividend Policy & Firm Performance4
Chapter 1: Introduction
1.1.Research Background
In the contemporary business environment, one of the main issues for strategic
management of firms is to formulate the most appropriate dividend policy. Dividend policy
refers to the guidelines and regulations and corresponding decisions of managers of a company
regarding dividend payments to the shareholders of the company. This decision has a significant
impact on shareholders’ wealth and investing decisions, and thus it is a main concern of a
corporate strategy. Dividend is the actual benefit that shareholders of a company obtain for their
wealth invested. This is also called the return on their investment. A range of factors affect the
dividend decisions which include financing constraints, investment choices and