Aggregate Dividend Behavior and Permanent Earnings Hypothesis

Posted: 30 Aug 2001

See all articles by Ming-Shiun Pan

Ming-Shiun Pan

Shippensburg University - Department of Finance and Management Information & Analysis

Abstract

The study examines the aggregate dividend behavior of U.S. corporations based on the permanent earnings hypothesis. Using annual data of aggregate earnings and dividends from 1871-1993, I find that although managers change dividends proportional to permanent earnings changes, they make revisions with a larger percentage change in dividends than in permanent earnings. The results from the post-war data show that firms follow a partial adjustment policy with a long-term dividend payout target in mind and make revisions with a delay. The quarterly data analysis yields results similar to those of the post-war annual data.

Suggested Citation

Pan, Ming-Shiun, Aggregate Dividend Behavior and Permanent Earnings Hypothesis. Financial Review, February 2001. Available at SSRN: https://ssrn.com/abstract=274408

Ming-Shiun Pan (Contact Author)

Shippensburg University - Department of Finance and Management Information & Analysis ( email )

Shippensburg University
Shippensburg, PA 17257
United States
717-477-1683 (Phone)
717-477-4067 (Fax)

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