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The information content of cashflows in the context of dividend smoothing

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  • Basil Al-Najjar
  • Yacine Belghitar

Abstract

This paper aims to investigate the information content of cash flows in the context of dividend smoothing. Unlike previous studies, we propose a novel partial adjustment model based on cash flows, and compare it to Lintners (1956) model. The results show that UK firms smooth their cash flows and that cash flows are the key determinant of dividend policy. Moreover, our proposed dividend partial adjustment model has a lower adjustment coefficient than Lintners model, suggesting that our estimates are much closer to reality. The results are consistent across different measures of cash flows.

Suggested Citation

  • Basil Al-Najjar & Yacine Belghitar, 2012. "The information content of cashflows in the context of dividend smoothing," Economic Issues Journal Articles, Economic Issues, vol. 17(2), pages 57-70, September.
    • Handle: RePEc:eis:articl:212alnajjar
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    References listed on IDEAS

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