Corporate payout smoothing: A variance decomposition approach

Edward C. Hoang and Indrit Hoxha ()

Journal of Empirical Finance, 2016, vol. 35, issue C, 1-13

Abstract: In this paper, we apply a variance decomposition methodology to quantify the smoothness of corporate payouts. We find that firms use debt and investment to smooth a large fraction of shocks to net income to keep payouts less variable. Specifically, our empirical results show that firms keep the growth of payouts relatively small and stable over time. Furthermore, our findings support theoretical work that demonstrates that the dynamics of investment and debt policy should be jointly modeled with payout policy.

Keywords: Debt; Investment; Lintner model; Net income; Payout (search for similar items in EconPapers)
JEL-codes: G30 G32 G35 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:35:y:2016:i:c:p:1-13

DOI: 10.1016/j.jempfin.2015.10.011

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