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<p>The purpose of this work is to clarify the causes and circumstances of the negative influence of the compound interest effect in investment processes and to refute the theory of the compound interest effect in the capitalization of dividends. The article considers the peculiarities of the negative effect of the compound interest effect in terms of capitalization of dividends. The reasons and circumstances of the negative value of the corresponding effect in investment processes were specified. It is stated that the effect of compound interest is often not positive at all in case of capitalization of dividends on shares. Dividend tax neutralizes the “magic of compound interest” in the case of appropriate capitalization of dividends. The payment of dividends is economically feasible only when the investor plans to direct these funds to consumption and not to capitalization. To improve the conditions of investment processes, the need to reduce the tax on dividends has been proven. It showed the possibility of avoiding the tax on dividends for investors in the case of its relatively large size. The material of the article allows us to refute the theory of the “compound interest effect” in the capitalization of dividends.</p>
</abstract>

The purpose of this work is to clarify the causes and circumstances of the negative influence of the compound interest effect in investment processes and to refute the theory of the compound interest effect in the capitalization of dividends. The article considers the peculiarities of the negative effect of the compound interest effect in terms of capitalization of dividends. The reasons and circumstances of the negative value of the corresponding effect in investment processes were specified. It is stated that the effect of compound interest is often not positive at all in case of capitalization of dividends on shares. Dividend tax neutralizes the “magic of compound interest” in the case of appropriate capitalization of dividends. The payment of dividends is economically feasible only when the investor plans to direct these funds to consumption and not to capitalization. To improve the conditions of investment processes, the need to reduce the tax on dividends has been proven. It showed the possibility of avoiding the tax on dividends for investors in the case of its relatively large size. The material of the article allows us to refute the theory of the “compound interest effect” in the capitalization of dividends.

Refutation of the Theory of “Compound Interest Effect” in the Capitalization of Dividends

Candidate of Economic Sciences, Associate Professor Volodymyr Dahl East Ukrainian National University

Professor Volodymyr Dahl East Ukrainian National University

Management Theory and Studies for Rural Business and Infrastructure Development

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

The purpose of this work is to clarify the causes and circumstances of the negative influence of the compound interest effect in investment processes and to...

Refutation of the Theory of “Compound Interest Effect” in the Capitalization of Dividends

Publié en ligne: 12 mai 2021

Pages: 13 - 20

Reçu: 18 août 2020

Accepté: 04 nov. 2021

DOI: https://doi.org/10.15544/mts.2021.02

Mots clés
compound interest effect, dividends, capitalization, dividend tax, investment processes

© 2021 Morhachov Illia et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Refutation of the Theory of “Compound Interest Effect” in the Capitalization of Dividends

Publié en ligne: 12 mai 2021

Pages: 13 - 20

Reçu: 18 août 2020

Accepté: 04 nov. 2021

DOI: https://doi.org/10.15544/mts.2021.02

Mots cléscompound interest effect, dividends, capitalization, dividend tax, investment processes

© 2021 Morhachov Illia et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Mots clés
compound interest effect, dividends, capitalization, dividend tax, investment processes