Large dividend increases and leverage
Ian A. Cooper and
Journal of Corporate Finance, 2018, vol. 48, issue C, 17-33
This study documents the fact that large dividend increases are followed by a significant increase in leverage, consistent with management increasing the dividend to use up excess debt capacity. However, the leverage increase is not captured by a standard partial adjustment model of leverage. Nor does it reflect variables known to be related to dividend increases, such as firm maturity, investment, and risk. Instead, the dividend increase signals a complex change in the way firms adjust to their leverage target, but it does not signal a change in the target.
Keywords: Capital structure; Dividend policy; Dividend changes; Leverage (search for similar items in EconPapers)
JEL-codes: G32 G35 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:48:y:2018:i:c:p:17-33
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