The relative predictability of returns and dividends is a central issue because it forms the paradigm to interpret asset price variation. A little studied question is how dividend smoothing, as a choice of corporate policy, affects predictability. We show that even if dividends are supposed to be predictable without smoothing, dividend smoothing can bury this predictability. Because aggregate d...

Abstract We derive a consistent valuation approach that integrates the interdependent effects of cash dividends, share repurchases and active debt management while considering personal taxes. The is based on assumption predetermined proportion flow to equity used for instead dividends. Additionally, we examine cost by deriving appropriate adjustment formulae. Furthermore, run simulations invest...

A rm whose net earnings are uncertain, and that is subject to the risk of bankruptcy, must choose between paying dividends and retaining earnings in a liquid reserve. Also, diierent operating strategies imply diierent combinations of expected return and variance. We model the rm's cash reserve as the diierence between the cumulative net earnings and the cumulative dividends. The rst is a diiusi...

This paper uncovers an increasing proportion of quoted UK companies omitting cash dividends. Using a large panel of quoted UK companies, we estimate models for the incidence of dividend omissions and cuts as functions of financial characteristics including cash flow, leverage, investment opportunities, investment and company size. These variables account for most of the increase in omission sin...

We show that repurchases have not only became an important form of payout for U.S. corporations, but also that firms finance their share repurchases with funds that otherwise would have been used to increase dividends. We find that young firms have a higher propensity to pay cash through repurchases than they did in the past and that repurchases have become the preferred form of initiating a ca...

Cash-flow Notation: We use (c0, c1, . . . , ci, . . . , cn) to denote the series of cash-flows where ci is received at time t = i . The length of a period, i.e. the interval of time between t = i and t = i + 1, will usually be understood from the context. Negative cash-flows refer to cash payments. The initial cash-flow, c0, will often be negative while the remaining cash-flows are positive. Th...

We compute the value of a firm that pays its cash flows each period through share repurchases in a dynamic environment where personal taxes are paid on realized capital gains and dividends. These results provide a measure of the personal tax advantages of equity financing relative to debt financing, which are often cited as increasing the cost of debt. The initial price of the firm depends on t...

We derive the optimal dynamic contract in a continuous-time principal-agent setting, in which both investors and the agent learn about the firm’s profitability over time. Because investors learn about the firm’s future profitability from current output, which also depends upon the agent’s actions, deviations by the agent distort investors’ beliefs. We characterize the optimal contract, and show...

This paper develops a simple signaling model whereby high valuation firm uses levels of investment, debt and dividends to convey information to the market regarding its valuation. Conditions are determined under which investment, debt and dividends are employed in a separating Nash equilibrium. Unlike many other signaling models where the source of asymmetric information concerns only the mean ...

We investigate the relative informativeness of earnings and dividends for firms with dual class capital structures. In these firms, two classes of common stock create a separation between cash flow rights and voting rights. Despite the concentrated ownership in the dual class firms, we find significantly lower informativeness of earnings, in the form of a weaker returns-earnings association, th...