What is the relation between financial flexibility and dividend smoothing?

Fliers, Philip T.

doi:10.1016/j.jimonfin.2018.12.009

Cited by 31 publications

(15 citation statements)

References 57 publications

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“…Furthermore, in the context of the target adjustment payout model of Lintner (1956), Lambrecht & Myers (2012) suggest a dynamic agency model in which all payout, investment, and financing decisions of a firm are made by the managers of this company who try to smooth and maximize their flow of rents by smoothing the payouts to the owners of the business enterprise. Fliers (2019) demonstrates how financial flexibility of a firm affects decisions on dividend changes and finds a nonlinear relationship.…”

Section: On Dividend Policymentioning

confidence: 99%

U.S. stock prices and the dot.com-bubble: Can dividend policy rescue the efficient market hypothesis?

Basse

Klein

Vigne

et al. 2021

Journal of Corporate Finance

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This paper thoroughly integrates speculative bubbles to corporate finance literature by focusing on dividend policy issues. More specifically, we examine the importance of dividend policy when testing for speculative bubbles in the S&P 500 equity index on a data set spanning 1871 to 2014. Given the phenomenon of dividend smoothing, in particular in the U.S., we question the usefulness of observed dividend payments as fundamental factor in testing for bubbles. Circumventing dividend smoothing, we construct hypothetical dividend payouts which are based on reported corporate earnings instead. The empirical evidence presented here indeed suggests that the dividend policy of firms affects testing for speculative bubbles. While the dot.com-bubble-commonly seen as the prime example for a stock price bubble not only in the NASDAQ but also in other, broader equity indices-is detected with the observed dividend series as fundamental factor, this is not necessarily the case with our adjusted dividend time series. Some of our results argue against a speculative price bubble in the broader U.S. stock market in the late 1990s.

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Section: On Dividend Policymentioning

confidence: 99%

U.S. stock prices and the dot.com-bubble: Can dividend policy rescue the efficient market hypothesis?

Basse

Klein

Vigne

et al. 2021

Journal of Corporate Finance

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show abstract

“…However, firm may increase their debt intentionally to fund dividend initiation or dividend increase. Even though the firm debt level increased, the post dividend initiation or dividend increase, firm idiosyncratic risk remain reduced (Fliers, 2019).…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

“…However, despite a vast array of theories on the relation between dividend and firm value offered, empirical findings are relatively inconclusive (Araujo, Moreira, & Tsuchida, 2011). Inconclusive results may stem from firm deliberate action to smooth their dividend payment (Fliers, 2019). To smooth dividends creates an artificial positive relationships with future firm performance (Karpavičius, 2014).…”

Section: Introductionmentioning

confidence: 99%

The Relation between Dividend and Financial Constraints to Firm Value

Teja¹,

Wilson²,

Chanry³

et al. 2020

J. financ. account. res.

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This study examines the relation between dividends and financial constraints to firm value using publicly traded firms in Indonesia from 2013 to 2017. The very exploration used a repeated cross section regression method to understand monotonic and non-monotonic alliance between dividends and financial constraints to firm value. The non-monotonic correlation measured by dummy variables for 6 dividends categories, i.e. 0 category is defined as firms that did not pay dividends and category 5 is defined as firms that pay dividends with the highest quintile. It is found that monotonic bond lowers the financial constraints that has more important and consistent positive effects on firm value relative to dividends. These findings imply investors to have higher preferences for a firm’s ability to realize good investment projects and provide higher future profits, relative to current profit in the form of dividends. It also found that non-monotonic connection between dividends and firm value and dividends and financial constraints have relatively equal positive effect to firm value.

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“…Unfortunately, our data does not permit more accurate estimation of dividend stability as done inLeary and Michaely (2012) orFliers (2019).…”

mentioning

confidence: 92%

Catering and Dividend Policy: Evidence From the Netherlands Over the Twentieth Century

2019

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This paper investigates the determinants of Dutch firms' dividend policies in the 20 th century. We identify three distinct episodes and document shifts in dividend policies in the 1930s and 1980s, because firm managers cater to the changing preferences of shareholders. The first episode, prior to the Second World War, was characterized by dividends that were fixed contracts between shareholder and management and the payouts were mechanically determined by earnings. The second epoch of Dutch dividend policy, until the 1980s, was characterized by dividend smoothing. Dividends were still strongly related to earnings, but because of shareholder's preferences for stable dividend income, earnings changes are incorporated in dividends with a lag. Finally, dividend policy in the most recent episode is inspired by shareholder wealth maximization, based on agency and signalling motives. In this period, dividends have become largely decoupled from earnings.

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What is the relation between financial flexibility and dividend smoothing?

Cited by 31 publications

References 57 publications

U.S. stock prices and the dot.com-bubble: Can dividend policy rescue the efficient market hypothesis?

U.S. stock prices and the dot.com-bubble: Can dividend policy rescue the efficient market hypothesis?

The Relation between Dividend and Financial Constraints to Firm Value

Catering and Dividend Policy: Evidence From the Netherlands Over the Twentieth Century

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