Premium
Aggregate Dividend Behavior and Permanent Earnings Hypothesis
Author(s) -
Pan MingShiun
Publication year - 2001
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/j.1540-6288.2001.tb00002.x
Subject(s) - dividend , earnings , dividend payout ratio , aggregate (composite) , economics , dividend policy , monetary economics , aggregate data , econometrics , financial economics , accounting , finance , statistics , mathematics , materials science , composite material
The study examines the aggregate dividend behavior of U.S. corporations based on the permanent earnings hypothesis. Using annual data of aggregate earnings and dividends from 1871–1993, I find that although managers change dividends proportional to permanent earnings changes, they make revisions with a larger percentage change in dividends than in permanent earnings. The results from the post‐war data show that firms follow a partial adjustment policy with a long‐term dividend payout target in mind and make revisions with a delay. The quarterly data analysis yields results similar to those of the post‐war annual data.