Premium
Dividend Initiations and Asymmetric Information: A Hazard Model
Author(s) -
Deshmukh Sanjay
Publication year - 2003
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/1540-6288.00050
Subject(s) - dividend , information asymmetry , dividend policy , econometrics , economics , pecking order , financial economics , hazard , context (archaeology) , cash flow , hazard model , monetary economics , actuarial science , microeconomics , accounting , finance , biology , ecology , paleontology , evolutionary biology
This paper investigates the dynamics of dividend policy using a hazard model. Specifically, the paper examines dividend initiations for a sample of firms that went public between 1990 and 1997. These dividend initiations are examined in the context of an alternative explanation based on the pecking order theory. The results indicate that the probability or the hazard rate of a dividend initiation is negatively related to both the level of asymmetric information and growth opportunities and positively related to the level of cash flow. These results are consistent with a pecking order explanation but inconsistent with a signaling explanation.