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QUALITY DISPERSION AND THE FEASIBILITY OF DIVIDENDS AS SIGNALS
Author(s) -
Rodriguez Ricardo J.
Publication year - 1992
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1992.tb00114.x
Subject(s) - dividend , dispersion (optics) , quality (philosophy) , schedule , economics , signal (programming language) , econometrics , business , computer science , finance , physics , management , quantum mechanics , optics , programming language
Abstract A dividend signaling equilibrium may not be feasible if some firms must pay an unrealistically high dividend to signal their quality. Therefore, feasibility requires a relatively narrow quality dispersion among signaling firms. However, the literature does not offer a characterization of the maximum quality dispersion that is consistent with a feasible signaling schedule. In this paper explicit quality dispersion constraints leading to feasible dividend signaling equilibria are determined.