Bulletin Autumn‧Winter 1995

Co r po r a te F i nance a n d D i v i d e nd Po l i c i es Research Focus on Countries i n the Asia-Pacific Region Area s o f Interes t fo rFinancia l Analyst s P r o f. F e r d i n a nd A . G u l o f t he S c h o ol o f A c c o u n t a n c y has b e en awa r d ed a grant o f HK$423,000 by the Research Grants Council for a project titled 'A cross-cultural management a c c o u n t i ng s t u dy o f t he d e t e r m i n a n ts o f c o m p e n s a t i on s c h emes a n d m a n a g e r i al performance'. I n what is the initial phase of the p r o j e c t , h e i s c o n d u c t i ng research o n the corporate finance and dividend policies of firms, and i n particular the role played by managers of large corporations i n choosing debt and dividend policies for the f i rm. This i s a k ey area f or financial analysts as i t covers debt policies o f firms and payment of cash dividends w h i c h may have implications for investment decisions. H i gh levels o f debt are n o rma l ly associated w i t h increased risk o f bankruptcy, but may also signal that the f i rm has higher g r ow th opportunities wh i ch need to be financed by debt. Similarly, a firm's d i v i dend levels are use d t o gauge the p rformance of the f i rm and its future prospects . H i gh levels of dividends may be seen as a signal of a more than anticipated increase i n earnings or perhaps a reduction i n f i rm risk. Research 24