Consistency of Dividend Signalling and Future Maturity Level:Evidence from UK Data

Carlos Martins ()

No 40, Working Papers de Economia (Economics Working Papers) from Departamento de Economia, Gestão e Engenharia Industrial, Universidade de Aveiro

Abstract: This paper analyses the relation between dividends and the mature level of a firm, by using market-to-book ratio as a proxy for Tobin’s Q, and Tobin’s Q as a indicator of either existence of new positive NPV projects or maturity level reached. The existent theory argues that the dividend payment decision either conveys information regarding future earnings (Signalling Theory) or is based on an Agency Theory Problem, concerning both Managers-Shareholders and Shareholders-Debtholders relationships. Here, another dividend signalling power is partially found, as dividend changes in period t seem to indicate a tendency in high Q firms to became more mature in t+1. This relation was not found for low Q firms, indicating that already mature firms do not change their status after a dividend change.

Keywords: Dividend Signalling, Mature Firms; Signalling Theory; Payout Policy. (search for similar items in EconPapers)
JEL-codes: C63 G35 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2007-02
New Economics Papers: this item is included in nep-cfn and nep-fmk
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Persistent link: https://EconPapers.repec.org/RePEc:ave:wpaper:402007

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