Financial Management

General Motors’ vehicle recall in 2014 involved 2.6 million vehicles. The company established a compensation fund for the victims of the company’s faulty ignition switches. Company officials, however, still expected the cost of the compensation fund to not surpass the expected $600 million. Of the 4,180 claims received, 455 were death claims.


Provide a clear history of GM’s dividend policy (using dividend per share, earnings per share and payout ratio) has been to date.

– chart, what policy are they following, and how long (5 years, quarterly, yearly)

Discuss the possible implications that this vehicle recall may have on the future direction of the dividend policy. More specifically, students should demonstrate what considerations (economic and non-economic) the company must take into account and how this will impact on the future dividend policy decisions that the directors have to make.

(does this $600m impact the financial?)

Demonstrate your understanding of the theories of dividend policy (relevance theory, clientele effect, signaling hypothesis) and how these different ideas can be related to this event. Students should organize the answer in a report form, incorporating the above requirements in a cohesive framework.