Impact of Foreign Direct Investment on Dividend Policy

EasyChair Preprint no. 12847

Abstract

Foreign Direct Investment (FDI) plays a significant role in shaping the economic landscape of countries worldwide. As multinational corporations expand their operations across borders, they often invest in foreign markets through FDI. One crucial aspect of a firm's financial decision-making is its dividend policy, which determines the distribution of profits to shareholders. This abstract explores the impact of foreign direct investment on dividend policies of companies operating in host countries.

The study begins by examining the theoretical foundations of dividend policy and the factors that influence it. It then delves into the relationship between FDI and dividend policy, highlighting the interplay between these two variables. The research investigates how FDI affects dividend payout ratios, dividend initiation and cessation, dividend stability, and dividend smoothing practices.

Several mechanisms are identified through which FDI can influence dividend policies. First, increased FDI inflows may enhance a firm's financial resources, leading to higher profits and cash flows. This financial strength can enable companies to increase dividend payouts to shareholders. Second, FDI can bring about technological advancements, efficiency gains, and access to new markets, resulting in improved profitability and higher dividend distributions. Third, the presence of foreign investors may exert pressure on firms to align their dividend policies with global standards and investor preferences.

Keyphrases: Business, Economics, management

@Booklet{EasyChair:12847,
  author = {Favour Olaoye and Kaledio Potter},
  title = {Impact of Foreign Direct Investment on Dividend Policy},
  howpublished = {EasyChair Preprint no. 12847},

  year = {EasyChair, 2024}}