Who Smoothes Dividends?

Abstract

This paper examines the relation between dividend smoothing and asymmetric information between managers and investors. We find that the extent of dividend smoothing are negatively related to the measures of information asymmetry. Firms with higher levels of asymmetric information have a higher propensity to smooth their dividends. These results imply that a firm's information environment affects its dividend smoothing decision.

Keywords: Dividend smoothing, information asymmetry

JEL Classification: G35