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Consistency of Dividend Signalling and Future Maturity Level:Evidence from UK Data

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  • Carlos Martins

    ()
    (Universidade de Aveiro)

Abstract

This paper analyses the relation between dividends and the mature level of a firm, by using market-to-book ratio as a proxy for Tobin’s Q, and Tobin’s Q as a indicator of either existence of new positive NPV projects or maturity level reached. The existent theory argues that the dividend payment decision either conveys information regarding future earnings (Signalling Theory) or is based on an Agency Theory Problem, concerning both Managers-Shareholders and Shareholders-Debtholders relationships. Here, another dividend signalling power is partially found, as dividend changes in period t seem to indicate a tendency in high Q firms to became more mature in t+1. This relation was not found for low Q firms, indicating that already mature firms do not change their status after a dividend change.

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Bibliographic Info

Paper provided by Departamento de Economia, Gestão e Engenharia Industrial, Universidade de Aveiro in its series Working Papers de Economia (Economics Working Papers) with number 40.

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Length: 50 pages
Date of creation: Feb 2007
Date of revision:
Handle: RePEc:ave:wpaper:402007

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Keywords: Dividend Signalling; Mature Firms; Signalling Theory; Payout Policy.;

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