A Test of the Easterbrook Hypothesis Regarding Dividend Payments and Agency Costs
AbstractEasterbrook (1984) argues that dividend payments may be an ambiguous signal unless the market can distinguish growing firms from disinvesting firms. Shares of growing firms that announce both financing and dividend increases are predicted to rise more in value than shares of firms announcing a dividend increase alone. We examine the relation between prior financing activity and the market response to initial dividends and find evidence consistent with the Easterbrook agency cost model.
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Bibliographic InfoArticle provided by Southern Finance Association & Southwestern Finance Association in its journal Journal of Financial Research.
Volume (Year): 16 (1993)
Issue (Month): 3 (Fall)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0270-2592
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- Andres, Christian & Betzer, André & Goergen, Marc, 2011. "Dividend policy, corporate control and tax clienteles: The case of Germany," CFS Working Paper Series 2011/16, Center for Financial Studies (CFS).
- Zhilan Feng & Chinmoy Ghosh & C. Sirmans, 2007. "CEO Involvement in Director Selection: Implications for REIT Dividend Policy," The Journal of Real Estate Finance and Economics, Springer, Springer, vol. 35(4), pages 385-410, November.
- Amoako-Adu, Ben & Baulkaran, Vishaal & Smith, Brian F., 2014. "Analysis of dividend policy of dual and single class U.S corporations," Journal of Economics and Business, Elsevier, Elsevier, vol. 72(C), pages 1-29.
- Christian Andres & André Betzer & Marc Goergen, 2012. "Dividend Policy, Corporate Control and the Tax Status of the Controlling Shareholder," Schumpeter Discussion Papers, UniversitÃ¤tsbibliothek Wuppertal, University Library sdp12006, Universitätsbibliothek Wuppertal, University Library.
- Filbeck, Greg & Mullineaux, Donald J., 1999. "Agency costs and dividend payments: The case of bank holding companies," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 39(3), pages 409-418.
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