Testing Tradeoff and Pecking Order Predictions about Dividends and Debt.”
AbstractConfirming predictions shared by the trade-off and pecking order models, more profitable firms and firms with fewer investments have higher dividend payouts. Confirming the pecking order model but contradicting the trade-off model, more profitable firms are less levered. Firms with more investments have less market leverage, which is consistent with the trade-off model and a complex pecking order model. Firms with more investments have lower long-term dividend payouts, but dividends do not vary to accommodate short-term variation in investment. As the pecking order model predicts, short-term variation in [oplus ]investment and earnings is mostly absorbed by debt. Copyright 2002, Oxford University Press.
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Bibliographic InfoPaper provided by Center for Research in Security Prices, Graduate School of Business, University of Chicago in its series CRSP working papers with number 506.
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- Eugene F. Fama, 2002. "Testing Trade-Off and Pecking Order Predictions About Dividends and Debt," Review of Financial Studies, Society for Financial Studies, vol. 15(1), pages 1-33, March.
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