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Does managerial reluctance of dividend cuts signal future earnings?

Author

Listed:
  • James Juichia Lin

    (National Chiao Tung University)

  • Cheng-Few Lee

    (Rutgers University)

Abstract

In this study, we develop alternative dividend stickiness measures as a proxy for managerial reluctance to cut dividends and investigate the information content of dividend stickiness. We find that firms with stickier dividend payout have greater earnings persistence, earnings growth, and pricing multiples on earnings. Further analysis shows that the signaling effect of dividend stickiness on future earnings is more pronounced for firms with less catering incentives to avoid dividend cuts. Our results suggest that dividend stickiness has incremental explanation over dividend payout for signaling future earnings.

Suggested Citation

  • James Juichia Lin & Cheng-Few Lee, 2021. "Does managerial reluctance of dividend cuts signal future earnings?," Review of Quantitative Finance and Accounting, Springer, vol. 56(2), pages 453-478, February.
    • Handle: RePEc:kap:rqfnac:v:56:y:2021:i:2:d:10.1007_s11156-020-00899-5
    DOI: 10.1007/s11156-020-00899-5
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    References listed on IDEAS

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    Cited by:

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    3. Anshu Agrawal, 2021. "Impact of Elimination of Dividend Distribution Tax on Indian Corporate Firms Amid COVID Disruptions," JRFM, MDPI, vol. 14(9), pages 1-38, September.
    4. Bai-Sian Chen & Hong-Yi Chen & Hsiao-Yin Chen & Fang-Chi Lin, 2022. "Corporate growth and strategic payout policy," Review of Quantitative Finance and Accounting, Springer, vol. 59(2), pages 641-669, August.

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