Capital Markets, Capital structure and Dividend Policy



Capital Markets, Capital structure and Dividend Policy

Introduction

The paper discusses about the concept of capital markets and capital structure in a holistic context. It also explains the importance of dividend policy. The paper is aimed at enlightening the financial aspects of capital market, capital structure and dividend policy from the organizational as well as the stakeholder's point of view.

Discussion

Capital Market

A Capital is comprised of a number of participants who buy and sell stocks and debt instruments in order to offer a range of products that promote financial savings and internal sources of capital for the companies (Choudhry, 2002). Capital markets are an ideal source of financing through the issuance of shares, in order to keep balanced the structure of capital of the company. The capital market is regulated by the Securities and Exchange Commission, through the Capital Market Law. This Act governs the offer securities to the public, whatever they may be, established for this purpose the principles of organization and operation, the rules governing the activity of those individuals and entities involved in them and their system of controls (Swanson, Srinidhi & Seetharaman, 2003).

A capital markets' investors concur individuals or corporations with excess capital) and financiers (legal persons in need of capital. These capital market participants are related through securities, these securities may be debt or equity (Choudhry, 2002). Besides the securities may be primary or secondary emission. The primary issue is the first public issuance and that makes a company that for the first time access to organized finance, these securities are traded on the primary market (Graham, Smart & Megginson, 2009).

The secondary emission starts when financial instruments or securities that have been placed in the primary market are subject to negotiation. These negotiations are usually done on the Stock Exchanges. The capital market investors make analysis of the possibilities of investment by two techniques: Fundamental analysis and technical analysis (Moyer, McGuigan & Kretlow, 2008).

Fundamental Analysis

This analysis technique to predict future prices of a value is based on careful study of the financial statements of the company station as well as future prospects for expansion and profit generation capacity (Pettit, 2011). Fundamental analysis also takes into account the situation of the company in its industry, the competition, the evolving market and the group where it is located and in general, socio-economic prospects, financial and political (Swanson, Srinidhi & Seetharaman, 2003). With all these components, the fundamental analyst comes to determining intrinsic value of the company about which you must quote the action on the exchange (Graham, Smart & Megginson, 2009).

Technical Analysis

Technical analysis is a set of techniques that attempt to predict stock prices from their historical aspect, taking into account the behavior of certain magnitudes stock as volume recruitment, offers from the last sessions, and share price data over longer periods, market capitalization, etc (Pettit, 2011). Technical analysis relies on the construction of graphs showing the historical evolution of the prices of securities, but also in analytical techniques that can predict stock ...