Dividend smoothing and firm valuation

0558897 - NHÚ 2023 RIV US eng J - Journal Article
Brockman, P. - Hanousek, Jan - Trešl, Jiří - Unlu, E.
Dividend smoothing and firm valuation.
Journal of Financial and Quantitative Analysis. Roč. 57, č. 4 (2022), s. 1621-1647. ISSN 0022-1090. E-ISSN 1756-6916
R&D Projects: GA ČR(CZ) GA16-20451S
Institutional support: RVO:67985998
Keywords : dividend smoothing * firm value * corporate finance
OECD category: Applied Economics, Econometrics
Impact factor: 3.9, year: 2022
Method of publishing: Limited access
https://doi.org/10.1017/S0022109021000673

We examine the relationship between dividend smoothing and firm valuation across 21 countries using several empirical methods and smoothing measures. Our main results show that dividends are capitalized at significantly larger values for high-smoothing firms than for low-smoothing firms. We also find that dividend-smoothing premiums are higher in countries with weak shareholder protection – suggesting that smoothing serves as a substitute mechanism to reduce agency costs. Overall, our findings support the view that managers use dividend smoothing predominantly as a bonding mechanism to reduce agency costs (Leary and Michaely (2011)), and not as a rent extraction mechanism (Lambrecht and Myers (2012)).
Permanent Link: http://hdl.handle.net/11104/0332393