Life Cycle Theory of Dividend: A Review Literature

Abstract

The purpose of the paper is to examine the relationship between dividend policy of the company and the life cycle theory. According to the life cycle theory, the company will pay dividend in the third stage, namely the maturity stage. In the early stage, the company has investment opportunities with high profit potential so that it requires large funds. As a result, dividend payments will be delayed. However, dividend payments remain a matter of debate today because dividend payments will be associated with company value. The theory of dividend policy states that paying dividends will increase firm value, but several research results show that dividend payments are not related to firm value.