The impact of dividend policy and capital structure on the market value of Saudi banks

Abstract

Purpose: The aim of this study is to obtain Empirical evidence from Saudi business environment; for the impact of the dividend policy and the capital structure on the market value of banks listed on Saudi stock exchange, Results and Recommendations: The results of the study indicate that there is a significant impact of dividend policy on the market value. However, ttudy finds that there is in significant impact of the capital structure on the market value. However, it shows that there is a significant impact of both dividend policy and capital structure on the market value of Saudi banks.  According to the results, the study recommends the necessity of determining the appropriate mix of financial sources (external and internal), as the optimal use of this mix may lead to a reduction in the cost of capital, which maximizes the enterprise value and opens its way for more investment opportunities, and thus increase its profitability. In addition, the financial markets and firmans management should pay attention to the dividend policy, due to its great effect on retained earnings, which represent a form of self-financing, as well as its effect on the market value of enterprises.