Capital Structure and Dividend Policy Matter for Private Companies

Corporate finance can be confusing if you are a private company. Much of what we think about comes, directly or indirectly, from corporate finance ideas and concepts developed around the public markets. This post looks at what is called the Modigliani-Miller theorem, makes a few observations, and then, attempts to relate them to closely held and family businesses, i.e., the private company world. We cannot blindly assume that all of the assumptions of the M-M theorem hold in the real world of private company finance. Capital structure influences the level of shareholder returns to equity over time. Dividend policy determines the current returns to owners over time. The combination of a reasonable capital structure, a reasonable dividend policy, and paying attention to the needs of various owners make real differences in the long-term success of many private companies.

Dividend Policy & 5 Reasons NOT to Keep Non-Operating Assets on Your Balance Sheet

The reasons given by most companies for accumulating excess assets are really excuses. This post provides five reasons why it is important not to accumulate non-operating assets. The way to avoid excess asset creep is with a well-thought out and executed dividend policy, which is also discussed.

Dividends and Dividend Policy for Private Companies: 7 Critical Things to Know About Your Company’s Dividend Policy

This post will focus on seven critical things you need to know about your company’s dividend policy. In summary: 1) Every company has a dividend policy; 2) Dividend policy influences return on business investment; 3) Dividend policy is a starting point for portfolio diversification; 4) Special dividends enhance personal liquidity and diversification; 5) Dividend policy does matter for private companies; 6) Dividend policy focuses management attention on financial performance; and 7) Boards of directors need to establish thoughtful dividend policies