IDEAS home Printed from https://ideas.repec.org/a/ids/amerfa/v6y2019i1p101-118.html
   My bibliography  Save this article

Consumption, earnings risk, and payout ratios

Author

Listed:
  • Claude Bergeron
  • Jean-Pierre Gueyie
  • Komlan Sedzro

Abstract

This paper investigates the theoretical relationship between earnings, risks and dividends, in an intertemporal context. After assuming that firms adjust their dividend payments toward a target dividend payout ratio, we utilise the framework of the consumption capital asset pricing model (CCAPM) to examine the effect of systematic earnings risk on dividend policy. Our main result indicates that the dividend payout ratio of a firm is negatively related to its earnings consumption beta, obtained from the covariance between aggregate consumption and earnings. This result suggests that risk measured with earnings influences dividend policy. This result also suggests that the earnings consumption beta integrates the multiple dimensions of a firm's earnings risk.

Suggested Citation

  • Claude Bergeron & Jean-Pierre Gueyie & Komlan Sedzro, 2019. "Consumption, earnings risk, and payout ratios," American Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 6(1), pages 101-118.
    • Handle: RePEc:ids:amerfa:v:6:y:2019:i:1:p:101-118
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=104194
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ids:amerfa:v:6:y:2019:i:1:p:101-118. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Parker (email available below). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=229 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.