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An Empirical Investigation of Asymmetric Behavior in Corporate Dividend Policy

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  • Shirvani, Hassan
  • Wilbratte, Barry

Abstract

Employing three alternative measures of ability to pay, the authors find support for the Lintner hypothesis that firms pursue a long-run target payout ratio and also that current earnings better explain long-run dividends than cash flows or stock prices. The evidence further indicates that corporations adjust dividends with a ratchet effect, raising them more readily than they lower them. More specifically, when dividends are below target levels, firms move toward equilibrium by increasing them, but when dividends are above target levels, firms approach equilibrium by restricting dividend increases as earnings rise. Copyright 1997 by Oxford University Press.

Suggested Citation

  • Shirvani, Hassan & Wilbratte, Barry, 1997. "An Empirical Investigation of Asymmetric Behavior in Corporate Dividend Policy," Economic Inquiry, Western Economic Association International, vol. 35(4), pages 847-857, October.
    • Handle: RePEc:oup:ecinqu:v:35:y:1997:i:4:p:847-57
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    Cited by:

    1. Christi Wann & D. Long, 2009. "Do liquidity induced changes in aggregate dividends signal aggregate future earnings growth?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 33(1), pages 1-12, January.
    2. M. Ershad HUSSAIN & Mahfuzul HAQUE, 2014. "Is the J-Curve a Reality in Developing Countries?," Journal of Economics and Political Economy, KSP Journals, vol. 1(2), pages 231-240, December.
    3. Hussain, M. Ershad & Haque, Mahfuzul, 2014. "Is the J-Curve a Reality in Developing Countries?," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 1(2), pages 231-240.

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