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The Impact of Dividends, Debt and Investment on Valuation Models

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  • William P. Rees

Abstract

The reliability of a basic earnings and equity model of value is tested using 8,287 cases drawn from UK industrial and commercial firms reporting during 1987–1995. A respecification of this model is used to investigate the value relevance of dividends, capital structure and capital expenditure. Both the dividend and capital expenditure signals appear to be significant and the impact of the former is surprisingly strong. There is no convincing evidence that equity value is affected by the level of debt. Further investigation of dividends confirms that they are less influential in large firms or in firms with high return on equity.

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  • William P. Rees, 1997. "The Impact of Dividends, Debt and Investment on Valuation Models," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 24(7‐8), pages 1111-1140, September.
    • Handle: RePEc:bla:jbfnac:v:24:y:1997:i:7-8:p:1111-1140
    DOI: 10.1111/1468-5957.00154
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