Abstract

http://ssrn.com/abstract=1572618
 
 

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Determinants of Dividend Smoothing: Empirical Evidence


Mark T. Leary


Washington University in St. Louis - Olin Business School; National Bureau of Economic Research (NBER)

Roni Michaely


Cornell University - Samuel Curtis Johnson Graduate School of Management; Interdisciplinary Center (IDC)

June 30, 2011

AFA 2011 Denver Meetings Paper
Johnson School Research Paper Series No. 18-2010

Abstract:     
We document the cross-sectional properties of corporate dividend smoothing policies and relate them to extant theories. We find that younger, smaller firms, firms with low dividend yields, more volatile earnings and returns, and firms with fewer and more disperse analyst forecasts smooth less. Firms that are cash cows, with low growth prospects, weaker governance and greater institutional holdings smooth more. We also document that dividend smoothing has steadily increased over the past 80 years, even before firms began using share repurchases in the mid-1980s. Taken together, our results suggest that dividend smoothing is most common among firms that are not financially constrained, face low levels of asymmetric information, and are most susceptible to agency conflicts. These findings provide challenges and guidance for the developing theoretical literature.

Number of Pages in PDF File: 74

JEL Classification: G35

working papers series


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Date posted: March 18, 2010 ; Last revised: July 2, 2011

Suggested Citation

Leary , Mark T. and Michaely, Roni, Determinants of Dividend Smoothing: Empirical Evidence (June 30, 2011). AFA 2011 Denver Meetings Paper; Johnson School Research Paper Series No. 18-2010. Available at SSRN: http://ssrn.com/abstract=1572618 or http://dx.doi.org/10.2139/ssrn.1572618

Contact Information

Mark T. Leary (Contact Author)
Washington University in St. Louis - Olin Business School ( email )
One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Roni Michaely
Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )
431 Sage Hall
Ithaca, NY 14853
United States
607-255-7209 (Phone)
607-254-4590 (Fax)
HOME PAGE: http://www.johnson.cornell.edu/faculty/profiles/Michaely/
Interdisciplinary Center (IDC)
P.O. Box 167
Herzliya, 46150
Israel
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