Corporate Finance Ansell Limited

Question: Discuss about theCorporate Finance for Ansell Limited. Answer: Introduction: The study mainly helps in depicting the overall share value of Ansell Limited by effectively evaluating its dividend for 7 years. In addition, the study effectively detects the overall dividend history of Ansell Limited for the past five years. Furthermore, the novice effective depicts the announcements date of final report in the study from which relative return of the company could be effectively calculated. In addition, the same day return of the ASX indices SP ASX 100 is also calculated to determine the excess return that is provided by the company on the announcement days. Lastly, the novice to understand the concept of dividend policy, information support, and signalling theories conducts an effective discussion with the relevant findings. Step 1: Determining Final Dividend History of Ansell Limited for Seven Years Balance Date Dividend Type Cent Per Share dollar per share percentage change 30/06/2016 Final 30.96 0.3096 -0.23% 30/06/2015 Final 31.19 0.3119 9.19% 30/06/2014 Final 22.00 0.22 0.00% 30/06/2013 Final 22.00 0.22 1.50% 30/06/2012 Final 20.50 0.205 1.50% 30/06/2011 Final 19.00 0.19 1.50% 30/06/2010 Final 17.50 0.175 1.50% 30/06/2009 Final 16.00 0.16 0.50% Step 2: Determining the Announcements Date Conducted by Ansell Limited for Seven Years Announcement date 15-Aug-16 10-Aug-15 18-Aug-14 20-Aug-13 14-Aug-12 15-Aug-11 23-Aug-10 17-Aug-09 Step 3: Calculating the Three-Day Return Earned by Ansell Limited: Ansell Limited Date Closing price Return 12-Aug-16 19.14 0.0095 15-Aug-16 22.53 0.1771 16-Aug-16 21.99 -0.0240 7-Aug-15 23.32 -0.0034 10-Aug-15 19.64 -0.1578 11-Aug-15 20.35 0.0362 15-Aug-14 17.5 -0.0028 18-Aug-14 18.25 0.0429 19-Aug-14 18.19 -0.0033 19-Aug-13 16.65 0.0085 20-Aug-13 17.23 0.0348 21-Aug-13 17.33 0.0058 13-Aug-12 12.25 -0.0065 14-Aug-12 12.64 0.0318 15-Aug-12 13.05 0.0324 12-Aug-11 11.46 0.0035 15-Aug-11 11.93 0.0410 16-Aug-11 12.02 0.0075 20-Aug-10 10.95 -0.015 23-Aug-10 11.24 0.0265 24-Aug-10 11.4 0.0142 14-Aug-09 7.91 -0.019 17-Aug-09 7.94 0.0038 18-Aug-09 8.67 0.0919 Calculating the Market Return for the Corresponding Period: ASX Market Date Closing price Return 12-Aug-16 4558.9 0.0036 15-Aug-16 4567.78 0.00195 16-Aug-16 4561.03 -0.0015 7-Aug-15 4572.54 -0.0247 10-Aug-15 4601.42 0.00632 11-Aug-15 4569.22 -0.007 15-Aug-14 4625.9 0.00317 18-Aug-14 4643.7 0.00385 19-Aug-14 4672.35 0.00617 19-Aug-13 4231.77 -0.001 20-Aug-13 4204.4 -0.0065 21-Aug-13 4221.92 0.00417 13-Aug-12 3516.09 0.00115 14-Aug-12 3522.83 0.00192 15-Aug-12 3512.72 -0.0029 12-Aug-11 3401.13 0.00759 15-Aug-11 3489.87 0.02609 16-Aug-11 3460.05 -0.0085 20-Aug-10 3621.38 -0.0101 23-Aug-10 3618.98 -0.0007 24-Aug-10 3579.51 -0.0109 14-Aug-09 3653.1 0.00567 17-Aug-09 3592.3 -0.0166 18-Aug-09 3589.3 -0.0008 Calculating the Excess Return: Excess return Date ANN return (A) ASX return (B) Excess Return [C=(A-B)] 12-Aug-16 0.949367% 0.359709% 0.589658% 15-Aug-16 17.711599% 0.194784% 17.516815% 16-Aug-16 -2.396804% -0.147774% -2.544578% 7-Aug-15 -0.341880% -2.474950% -2.816830% 10-Aug-15 -15.780446% 0.631596% -15.148850% 11-Aug-15 3.615071% -0.699784% 2.915287% 15-Aug-14 -0.284900% 0.317049% -0.032148% 18-Aug-14 4.285714% 0.384790% 3.900924% 19-Aug-14 -0.328767% 0.616965% -0.288198% 19-Aug-13 0.847971% -0.103867% 0.744104% 20-Aug-13 3.483483% -0.646774% 2.836709% 21-Aug-13 0.580383% 0.416706% 0.163677% 13-Aug-12 -0.648824% 0.115318% -0.533506% 14-Aug-12 3.183673% 0.191690% 2.991983% 15-Aug-12 3.243671% -0.286985% 2.956686% 12-Aug-11 0.350263% 0.759295% -0.409032% 15-Aug-11 4.101222% 2.609133% 1.492089% 16-Aug-11 0.754401% -0.854473% -0.100072% 20-Aug-10 -1.528777% -1.012188% -0.516589% 23-Aug-10 2.648402% -0.066273% 2.582129% 24-Aug-10 1.423488% -1.090639% 0.332849% 14-Aug-09 -1.861042% 0.567103% -1.293940% 17-Aug-09 0.379267% -1.664340% -1.285073% 18-Aug-09 9.193955% -0.083512% 9.110443% Step 4: Discussing the Finding with Relevant Theory of Dividend Policy, Information Content, and Signalling Elements: According to the relevant calculations conducted in the above table, the excess return generated by Ansell Limited during the announcements data is effectively calculated. In addition, the effect of announcement on the share price of Ansell could be effective depicted from the overall daily returns. Some researchers mentioned that some investors after the effective announcements are able to detect the financial position of the company and make adequate investment decisions[1]. On the other hand, other researchers criticises that major investors mainly use technical analysis to determine the future return that might be generated by a particular investment. In addition, the major price movement on the announcement date of Ansell limited could be seen from the above tables. Moreover, the announcements of the final annual report mainly help in depicting the increase in demand of shares, which in turn raised the share price of the company. In this context, researchers mentioned that improving financial performance and rising divided policy mainly helps investors to make adequate investment in the company[2]. Furthermore, in comparison to the return generated by ASX and Ansell, it could be seen that Ansell in the announcement days have generated excess return compared to the Australian Index. In addition, it is also seen that in the year 2009, 2010, and 2013 the ASX market mainly provided negative return, while the Ansell limited provided exponentially higher return. Dividend Policy Theory: As per the dividend policy theory, the investors mainly use the overall dividends provided by the company to determine its share price. The dividend Gordon growth model and Walter Model are mainly identified as the relevant dividend theory, which are used by investors to detect the future price movement of the company. Some researchers mentioned that change in dividend percentage are used by investors to predict the future price of the shares, which in turn helps in making adequate investment decisions[3]. The percentage change in dividends and return generated by the company is mainly adequate, which in turn increases the overall profitability. Thus, it could be evaluated that Gordon growth model in more relevant to detect the price movement of Ansell limited as the dividend of the company is not fixed and relatively changes in 2014, 2015 and 2016. Information Content: The information content is mainly an effective tool, which is used by the companies to promote their share price. In addition, as per the information content effect, any news, or announcements provided by the company mainly have affect on its share price. Moreover, the share price movement of Ansell Limited is evaluated in the above tables, which mainly helps in stating the huge return generated by the company in the announcements date. Thus, the effect of the overall information content could be seen in the price movement of the company. In addition, adverse news might reduce the share price and positive news might improve the overall share price of the company. Some researchers stated that companies effectively build up expectations of the investors before the financial announcements, which in turn help in boosting their share price[4]. On the contrary, other researchers argued that companies using the information content strategy are able to reduce the negative impact from reduced performance. Signalling Elements: The investors to determine the future prospects that could be provided by the company mainly use the signalling elements. In addition, the theory is only relevant if the company increases the dividends each year, which in turn help in depicting its financial competency. Moreover, the dividend of Ansell limited has mainly risen from 2009 to 2015, which effectively supports the signalling element theory. In addition, according to the signalling element theory the share price of Ansell limited has mainly seen spike during the annual announcements. Researchers stated that investors to determine the future prospects of the company mainly use dividend-signalling theory. However, other researchers argued that signalling theory loses its friction if the company pays high dividend despite the financial loss incurred during the year[5]. Conclusion: The overall study mainly helps in identifying the spike in share price of Ansell Limited after each final announcement. In addition, the novice effectively calculates the overall excess return attained by Ansell limited one day before, during, and after the announcements conducted by the company. Moreover, the study effectively depicts the relevant discounts model, which could be used by investors to make adequate investment decisions. In addition, the novice also links the relevant theories like dividend policy relevance, information content and signalling elements with the return provided by Ansell limited during the announcements. Reference and Bibliography: "Modified Dividend Discount Model" (2015) 03Review Pub Administration Manag Agosto, Arianna and Enrico Moretto, "Variance Matters (In Stochastic Dividend Discount Models)" (2014) 11Annals of Finance Berk, Jonathan B and Peter M DeMarzo,Corporate Finance(Pearson, 2014) Goldstein, Itay and Dirk Hackbarth, "Corporate Finance Theory: Introduction To Special Issue" (2014) 29Journal of Corporate Finance Hillier, David,Corporate Finance(McGraw-Hill, 2013) Kimyagarov, Gabriel and Anil Shivdasani, "Managing Pension Risks: A Corporate Finance Perspective" (2013) 25Journal of Applied Corporate Finance