The Determinants of Dividend Smoothing Behaviour

Posted: 15 Sep 1999

See all articles by Jinho Jeong

Jinho Jeong

Hansei University

John G. Powell

Massey University - Department of Finance Banking and Property

Date Written: August 1994


This paper empirically investigates the cross-sectional properties of the dividend smoothing policies of 890 firms over a twenty-year time period in order to determine the extent to which important firm characteristics systematically alter the degree of dividend smoothing carried out by corporations. Dividend smoothing is measured by an isoelastic functional relationship between dividends and earnings. Firm characteristics which are likely to affect corporate dividend smoothing policies are identified using dividend signalling theory, and cross-sectional regression analysis is used to test these implications. The paper finds that riskier and smaller firms smooth dividends to a greater extent, as dividend signalling theory predicts. The presence of financial slack lowers a corporation's tendency to smooth dividends and the influence of firm growth rates is insignificant. These latter results are inconsistent with dividend signalling implications.

JEL Classification: G35

Suggested Citation

Jeong, Jinho and Powell, John G., The Determinants of Dividend Smoothing Behaviour (August 1994). Available at SSRN:

Jinho Jeong (Contact Author)

Hansei University ( email )

604-5, Dangjung-dong, Kunpo-si
Department of Business Administration
Kyunggi-do 435-742
82-343-50-5051 (Phone)
82-343-50-5124 (Fax)

John G. Powell

Massey University - Department of Finance Banking and Property ( email )

Private Bag 11 222
Massey University
Palmerston North, 4442
New Zealand

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