Dividend smoothing vs dividend signalling: evidence from UK firms

  • Goddard J
  • McMillan D
  • Wilson J
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Abstract

We test for the validity of the smoothing and signalling hypotheses of dividend determination.There is strong evidence of a contemporaneous relationship between prices, dividends and earnings, and little evidence of independence between these variables. Some evidence in favour of both the smoothing and the signalling hypothesis is obtained from causality tests, with perhaps more support for the latter hypothesis. However, there is considerable diversity in the causal relationships between prices, dividends and earnings

Author-supplied keywords

  • Antoregressive processes
  • Dividends
  • Vectors

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