Name: Mangate Samadhan Baburao, Ms. Akshita Sharma
Country: India

Year: 2022
Volume: Volume-9, Issue-2 (July-December)
Page Number: 72-84

This study revisits dividend policy within the theoretical frameworks of information
asymmetry and agency costs, emphasizing its continued relevance in modern corporate finance. The paper adopts a conceptual and literature-based approach to examine how dividend decisions function as mechanisms for reducing information gaps between managers and investors, while also mitigating conflicts arising from the separation of ownership and control. The findings suggest that dividend policy plays a dual role: as a signaling device that conveys firm performance and future prospects, and as a governance tool that limits managerial discretion over free cash flows. The analysis further highlights that institutional factors, ownership structures, and market conditions significantly influence dividend behavior across firms. The observed trend in dividend payouts from 2011 to 2021 supports the argument that firms increasingly use dividends to enhance investor confidence and maintain financial transparency. Overall, the study provides a comprehensive theoretical understanding of dividend policy and its strategic importance in addressing market imperfections.