The effect of dividend smoothing on bond spreads: Evidence from Japan

Yasuharu Aoki

International Review of Economics & Finance, 2023, vol. 85, issue C, 621-637

Abstract: This study investigates the impact of dividend smoothing on bond spreads, using data on Japanese bond-issuing firms. The regression results show that, although dividend smoothing is not systematically associated with bond spreads, it moderates the relationship between target payout ratios and bond spreads for firms facing serious conflicts of interest between shareholders and bondholders over dividends. Specifically, when the level of dividend smoothing is low, the relationship between target payout ratios and bond spreads is positive. However, when the level of dividend smoothing is high, target payout ratios are unrelated to bond spreads.

Keywords: Payout; Dividend smoothing; Signaling; Wealth transfer; Bond spread (search for similar items in EconPapers)
JEL-codes: G12 G23 G35 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:85:y:2023:i:c:p:621-637

DOI: 10.1016/j.iref.2023.02.018

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