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Dividend Initiations and Asymmetric Information: A Hazard Model

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  • Sanjay Deshmukh

Abstract

This paper investigates the dynamics of dividend policy using a hazard model. Specifically, the paper examines dividend initiations for a sample of firms that went public between 1990 and 1997. These dividend initiations are examined in the context of an alternative explanation based on the pecking order theory. The results indicate that the probability or the hazard rate of a dividend initiation is negatively related to both the level of asymmetric information and growth opportunities and positively related to the level of cash flow. These results are consistent with a pecking order explanation but inconsistent with a signaling explanation.

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  • Sanjay Deshmukh, 2003. "Dividend Initiations and Asymmetric Information: A Hazard Model," The Financial Review, Eastern Finance Association, vol. 38(3), pages 351-368, August.
    • Handle: RePEc:bla:finrev:v:38:y:2003:i:3:p:351-368
    DOI: 10.1111/1540-6288.00050
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