Abstract
This paper investigates dividend dynamics using a generalized partial adjustment model. A novel feature of our model is that it allows managers to consider the earnings history via adaptive expectation formation of future earnings for their payout decisions. We show that firms adjust dividends to their target payouts much faster than previously documented. We also show that target dividends are predominantly driven by firm-specific effects, and tend to become significantly more stable when managers form future earnings prospects adaptively. Thus, sticky dividends could arise from their attempts to conform to the target payouts, thereby leading to higher dividend adjustment speeds.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
