The Asymmetric Response of Dividends to Earnings News

Jin Seo Cho (), Matthew Greenwood-Nimmo and Yongcheol Shin
Additional contact information
Yongcheol Shin: University of York

No 2023rwp-210, Working papers from Yonsei University, Yonsei Economics Research Institute

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 signalling effects for payout policy.

Keywords: Payout policy; dividend-smoothing; sign-asymmetry; two-step estimation. (search for similar items in EconPapers)
JEL-codes: C22 C58 G35 (search for similar items in EconPapers)
Pages: 15pages
Date: 2023-03
New Economics Papers: this item is included in nep-cfn
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Citations: View citations in EconPapers (2)

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Journal Article: The asymmetric response of dividends to earnings news (2023)
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