An international analysis of dividend smoothing

56 Pages Posted: 5 Jul 2013 Last revised: 13 Nov 2020

See all articles by David Javakhadze

David Javakhadze

Florida Atlantic University

Stephen P. Ferris

University of Missouri at Columbia - Department of Finance

Nilanjan Sen

Nanyang Business School, Nanyang Technological University

Date Written: September 3, 2014

Abstract

This study examines the extent to which agency-based models and asymmetric information
theories explain dividend smoothing around the world. Tests on a cross-section of more
than two thousand firms from twenty-four countries show that managers of firms with low
market-to-book ratios and less cash engage in greater dividend smoothing. Further, firms with
highly-concentrated ownership structure and strong corporate governance smooth dividends
less. In addition, managers of firms in industries facing high levels of competition smooth
dividends more. We also determine that the extent of legal protections provided to shareholders
and the culture of the country in which the firm is incorporated, as well as tax regime, have
additional explanatory power for dividend smoothing. Our results are most consistent with the
simultaneous presence of agency and information asymmetry effects in the decision to smooth
dividends.

Keywords: dividend smoothing, information asymmetry, agency costs

JEL Classification: D22, G34, G35

Suggested Citation

Javakhadze, David and Ferris, Stephen P. and Sen, Nilanjan, An international analysis of dividend smoothing (September 3, 2014). Journal of Corporate Finance, Vol. 29, 2014, Available at SSRN: https://ssrn.com/abstract=2289986 or http://dx.doi.org/10.2139/ssrn.2289986

David Javakhadze (Contact Author)

Florida Atlantic University ( email )

College of Busines
777 Glades Road
Boca Raton, FL 33433
United States
561-297-2914 (Phone)

Stephen P. Ferris

University of Missouri at Columbia - Department of Finance ( email )

214 Middlebush Hall
Columbia, MO 65211
United States
573-882-6272 (Phone)
573-884-6296 (Fax)

Nilanjan Sen

Nanyang Business School, Nanyang Technological University ( email )

Singapore, 639798
Singapore

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