The Nexus Between Capital Structure And Dividend Policy: Literarture Review And Contemporary Gaps

Abstract

This paper reports on a systematic literature review that focusing on the firms major two corporate finance decisions about the nexus between the optimal capital structure and dividend policy. By the review of extensive literature review search from the different search engine database, we identified 45 articles that address the issues in this context. Since the optimal level of both the capital strcutre and the dividend policy is a major challenge for the financial managers which ultimately affects the financial value of both firms and its shareholders. Therefore it has been proved that firms reached its optimal level when its marginal benift equal to its marginal cost or firm should declare dividend only when having no deficit of internal funds and should finance its business operation firstly either through retain earning secondly through debt and finally can issue the shares. Further in this context the gaps of research areas were highlighted in the conclusion section those needs futher research work in the future