Dividends as Reference Points: A Behavioral Signaling Approach
Review of Financial Studies (Forthcoming)
64 Pages Posted: 16 Dec 2011 Last revised: 5 Dec 2015
There are 3 versions of this paper
Dividends as Reference Points: A Behavioral Signaling Approach
Dividends as Reference Points: A Behavioral Signaling Approach
Dividends as Reference Points: A Behavioral Signaling Approach
Date Written: January 22, 2015
Abstract
We outline a dividend signaling model that features investors who are averse to dividend cuts. Managers with strong unobservable cash earnings pay high dividends but retain enough to be likely not to fall short next period. The model is consistent with a Lintner partial-adjustment model, modal dividend changes of zero, stronger market reactions to dividend cuts than increases, comparatively infrequent and irregular repurchases, and a mechanism that does not depend on public destruction of value, which managers reject in surveys. New tests involve stronger reactions to changes from longer-maintained dividend levels and reference point currencies of American Depository Receipt dividends.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Disappearing Dividends: Changing Firm Characteristics or Lower Propensity to Pay?
By Eugene F. Fama and Kenneth R. French
-
Dividends, Share Repurchases, and the Substitution Hypothesis
By Gustavo Grullon and Roni Michaely
-
Payout Policy in the 21st Century
By Alon Brav, John R. Graham, ...
-
Payout Policy in the 21st Century
By Alon Brav, Campbell R. Harvey, ...
-
Financial Flexibility and the Choice between Dividends and Stock Repurchases
By Clifford P. Stephens, Murali Jagannathan, ...
-
By Roni Michaely and Franklin Allen
-
By Joan Farre-mensa, Roni Michaely, ...
-
Payout Policy in the 21th Century: The Data
By Alon Brav, Campbell R. Harvey, ...
-
A Catering Theory of Dividends
By Malcolm P. Baker and Jeffrey Wurgler
-
A Catering Theory of Dividends
By Malcolm P. Baker and Jeffrey Wurgler