Purpose – The purpose of this paper is to assess how investment, financing and dividend policies may affect firm value. Design/methodology/approach – The paper develops a system dynamics‐based model by using “financial management approach,” “capital structure approach,” “resource‐based approach,” and “sustainable growth approach” to identify investment, financing and dividend policies that may help maximize the firm value. Findings – Adequate investment in productive assets is the first step to achieve value maximization objective. Low debt capital structure plays a dominant role to maximize the firm value, contrary to the suggestions generally found in corporate finance literature. Rather insignificant role of firm's short‐term financing policy is observed. A consistently stable dividend policy is also a prerequisite of firm value maximization. Research limitations/implications – The limitations of this study include: the competitors' actions are not modeled; human resources and other intangible resources are not modeled; instead of market debt, debt is assumed to be bank debt. Future studies may bring in the competitors' actions, intangible assets including human resources, and may also consider to model debt as market debt. Practical implications – The firms operating in favorable product market conditions should keep their operating and financial risks low which will also maximize their firm value. On the other hand, the firms facing unfavorable product market conditions have to make a trade‐off to minimize operating risk vs financial risk. Originality/value – Usually the studies test one policy in isolation. However, this may probably be the first study that simultaneously tests various combinations of investment, financing and dividend policies that may help maximize the firm value.
Journal of Modelling in Management – Emerald Publishing
Published: Mar 20, 2007
Keywords: Value analysis; Business performance; Financing; Investment appraisal; Dividends; Financial modelling
It’s your single place to instantly
discover and read the research
that matters to you.
Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.
All for just $49/month
Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly
Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.
Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.
Read from thousands of the leading scholarly journals from SpringerNature, Wiley-Blackwell, Oxford University Press and more.
All the latest content is available, no embargo periods.
“Hi guys, I cannot tell you how much I love this resource. Incredible. I really believe you've hit the nail on the head with this site in regards to solving the research-purchase issue.”Daniel C.
“Whoa! It’s like Spotify but for academic articles.”@Phil_Robichaud
“I must say, @deepdyve is a fabulous solution to the independent researcher's problem of #access to #information.”@deepthiw
“My last article couldn't be possible without the platform @deepdyve that makes journal papers cheaper.”@JoseServera