BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -Large and reputed companies generally have easy access to the capital market and, therefore, may depend less on retained earnings to finance their growth. These companies tend to pay higher dividends than the smaller companies. In this way capital market effect dividend decisions.

Detailed explanation-2: -Access to capital market: Generally, companies having greater access to the capital market are likely to pay higher dividends. This is because they need not rely much on retained earnings. On the other hand, companies with lower access to capital markets are likely to pay lower dividends.

Detailed explanation-3: -A company having easy access to the capital markets can follow a liberal dividend policy. It is a policy of distributing a major part of its earnings to its shareholders as dividend and retains a minimum amount as retained earnings.

Detailed explanation-4: -Capital markets allow traders to buy and sell stocks and bonds, and enable businesses to raise financial capital to grow. Businesses also have reduced risk and expenses in acquiring financial capital because they have reliable markets where they can obtain funding.

Detailed explanation-5: -Capital structure decisions affect the dividend policy of an organization. If an organization needs more debt to finance its projects it is less likely announce dividends for its shareholders.