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Discussion: Signaling, Information Content, and the Reluctance to Cut Dividends

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  • Senbet, Lemma W.

Abstract

Avner Kalay makes a point that managerial reluctance to cut dividends is a necessary condition for the existence of a signaling equilibrium in which dividends are employed as a signaling device. He argues, however, that the available empirical evidence is unable to confirm the reluctance to cut dividends. In particular, the well-known Lintner's (1956) partial adjustment model, which is often cited in support of the reluctance to cut dividends, is empirically indistinguishable from an alternative model which is devoid of such a reluctance. Kalay then conducts an alternative test, but it too leads to an inconclusive result on the issue.

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  • Senbet, Lemma W., 1980. "Discussion: Signaling, Information Content, and the Reluctance to Cut Dividends," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 15(4), pages 871-873, November.
    • Handle: RePEc:cup:jfinqa:v:15:y:1980:i:04:p:871-873_01
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