[Dividend policy and Salaries in the UK banking industry-Barclays Bank]

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Table of Contents

CHAPTER 1: INTRODUCTION2

BACKGROUND2

RESEARCH RATIONAL5

PURPOSE OF STUDY5

AIMS & OBJECTIVES6

CHAPTER 2: LITERATURE REVIEW7

Dividend Policy of Banks14

Fixed amount of dividend per share14

The policy of "extra dividend"15

Fixed rate of dividend payment16

The target dividend payout rate17

Residual (excess) dividend policy18

100% of retained earnings18

Factors of Dividend policy19

Legal Restrictions19

Utilities19

Insolvency19

Excessive accumulation of profits20

Contractual Restrictions20

Market Considerations20

CHAPTER 3: METHDOLOGY22

Method of Inquiry22

Data Collection23

CHAPTER 4: FINDINGS24

Distribution of Dividend to shareholders25

Distribution of Dividend to employees27

CHAPTER 5: CONCLUSION & RECOMMENDATIONS33

REFERENCES35

CHAPTER 1: INTRODUCTION

This chapter of the research tends to develop an understanding and identify the reasons for conducting a research onto the topic of Dividend policy and Salaries in the UK banking industry. In order to understand the dynamics of the subject, this chapter would also inject an understanding of the factors influencing the development of dividend policy in UK banking industry. The nomenclature of this chapter tends to stand on the bricks of rationale behind the research, research objectives, and significance of study. This chapter, not only in this research tends to be of vital importance but in any other researches it tends to hold its significant ground. It tends to hold significant place solely due to the fact that it serves as the face of the research. The reader will be able to gauge the understanding of the subject through this chapter. The understanding injected in the mind of the reader in this chapter will allow him or her to further understand the related notions associated with the subject.

Background

Dividend disbursements are based on a percentage of the par value of the stock or are a certain sum per share of no-par-value stock. They become payable only when approved by the board of directors and are usually declared at regular intervals. Obviously, dividends should not be paid unless the company has accumulated a profit or surplus. Dividends are specific type of corporate financial policy that is difficult to explain in terms of frictionless markets. If a firm has profitable investment opportunities, the managers should pursue them and thus maximize the total firm value. Distributing dividends to shareholders may indicate the lack of such investment opportunities. Surprisingly, however, banks issue dividends and obtain external financing at the same time, thus distributing funds to their shareholders and making investments at the same time. Miller and Rock (1985) address this problem by considering the information content of dividends. Dividends are a signalling device because of the commitment associated with them: Dividends must be paid at regular intervals and therefore effectively restrict free cash flows of the firm. In equilibrium, firms with relatively high cash flows can afford to pay dividends, and thus dividend announcements can be used to signal firm value (Spence, 2003, p. 367).

Dividend Policy relates to the distribution of profits to shareholders or stops them in order to re-invest in the bank. Policy Decisions dividends are either positive or negative impact on the bank's stock price. These include two major problems: how much profit should be paid at a specified time and that the bank should ...