The asymmetric response of dividends to earnings news

Jin Seo Cho; Matthew Greenwood-Nimmo; Yongcheol Shin

doi:10.1016/j.frl.2023.103792

The asymmetric response of dividends to earnings news

Jin Seo Cho^*, Matthew Greenwood-Nimmo, Yongcheol Shin

^*Corresponding author for this work

Indonesia Project

Research output: Contribution to journal › Article › peer-review

4 Citations (Scopus)

Abstract

We provide new evidence of sign asymmetry in dividend payout policy in the postwar period in the U.S. Using a nonlinear autoregressive distributed lag model, we show that managers: (i) smooth the time-path of dividends relative to earnings; (ii) target a higher long-run payout ratio when earnings increase than when they decrease; and (iii) cut dividends faster than they raise dividends. Our findings are consistent with existing research on the implications of agency problems and signaling effects for payout policy.

Original language	English
Article number	103792
Pages (from-to)	1-7
Number of pages	7
Journal	Finance Research Letters
Volume	54
DOIs	https://doi.org/10.1016/j.frl.2023.103792
Publication status	E-pub ahead of print - 20 Mar 2023

Access to Document

10.1016/j.frl.2023.103792

Cite this

@article{69bc6436c46a4e5e8310b38a45bf192f,

title = "The asymmetric response of dividends to earnings news",

abstract = "We provide new evidence of sign asymmetry in dividend payout policy in the postwar period in the U.S. Using a nonlinear autoregressive distributed lag model, we show that managers: (i) smooth the time-path of dividends relative to earnings; (ii) target a higher long-run payout ratio when earnings increase than when they decrease; and (iii) cut dividends faster than they raise dividends. Our findings are consistent with existing research on the implications of agency problems and signaling effects for payout policy.",

keywords = "Dividend smoothing, Payout policy, Sign asymmetry, Two-step estimation",

author = "Cho, {Jin Seo} and Matthew Greenwood-Nimmo and Yongcheol Shin",

note = "Publisher Copyright: {\textcopyright} 2023 Elsevier Inc.",

year = "2023",

month = mar,

day = "20",

doi = "10.1016/j.frl.2023.103792",

language = "English",

volume = "54",

pages = "1--7",

journal = "Finance Research Letters",

issn = "1544-6123",

publisher = "Elsevier B.V.",

}

TY - JOUR

T1 - The asymmetric response of dividends to earnings news

AU - Cho, Jin Seo

AU - Greenwood-Nimmo, Matthew

AU - Shin, Yongcheol

PY - 2023/3/20

Y1 - 2023/3/20

N2 - We provide new evidence of sign asymmetry in dividend payout policy in the postwar period in the U.S. Using a nonlinear autoregressive distributed lag model, we show that managers: (i) smooth the time-path of dividends relative to earnings; (ii) target a higher long-run payout ratio when earnings increase than when they decrease; and (iii) cut dividends faster than they raise dividends. Our findings are consistent with existing research on the implications of agency problems and signaling effects for payout policy.

AB - We provide new evidence of sign asymmetry in dividend payout policy in the postwar period in the U.S. Using a nonlinear autoregressive distributed lag model, we show that managers: (i) smooth the time-path of dividends relative to earnings; (ii) target a higher long-run payout ratio when earnings increase than when they decrease; and (iii) cut dividends faster than they raise dividends. Our findings are consistent with existing research on the implications of agency problems and signaling effects for payout policy.

KW - Dividend smoothing

KW - Payout policy

KW - Sign asymmetry

KW - Two-step estimation

UR - http://www.scopus.com/inward/record.url?scp=85151008181&partnerID=8YFLogxK

U2 - 10.1016/j.frl.2023.103792

DO - 10.1016/j.frl.2023.103792

M3 - Article

SN - 1544-6123

VL - 54

SP - 1

EP - 7

JO - Finance Research Letters

JF - Finance Research Letters

M1 - 103792

ER -

The asymmetric response of dividends to earnings news

Abstract

Access to Document

Other files and links

Fingerprint

Cite this