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Dividend Policy and Increasing Discount Rates: A Clarification

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  • Higgins, Robert C.

Abstract

For almost a decade, Myron Gordon has argued repeatedly that an enterprise's dividend policy can affect its share price [2, 3, and 4]. The essence of his argument is that risk-averse investors are likely to perceive current dividends as less risky than future ones. Consequently, a corporate decision to reduce current, in favor of increased future, dividends will reduce share prices, even when the funds are invested to yield the firm's cost of capital.

Suggested Citation

  • Higgins, Robert C., 1972. "Dividend Policy and Increasing Discount Rates: A Clarification," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 7(3), pages 1757-1762, June.
    • Handle: RePEc:cup:jfinqa:v:7:y:1972:i:03:p:1757-1762_01
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    Cited by:

    1. Nabaraj Adhikari, Ph.D., 2015. "Determinants of Corporate Dividend Payout in Nepal," NRB Economic Review, Nepal Rastra Bank, Economic Research Department, vol. 27(2), pages 53-74, October.
    2. Mori, Naoya, 2010. "Tax clientele effects of dividends under intertemporal consumption choices," Journal of Banking & Finance, Elsevier, vol. 34(5), pages 1089-1097, May.
    3. Nabaraj Adhikari, Ph.D., 2015. "Determinants of Corporate Dividend Payout in Nepal," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 27(2), pages 1-22, October.

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