IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Market Value and Aggregate Dividends: A Reappraisal of Recent Tests, and Evidence from European Markets

Listed author(s):
  • Stephan Leithner
  • Heinz Zimmermann
Registered author(s):

    This paper addresses the relationship between aggregate dividend payments and maiket capitalization as related to the firm's dividend decision. Most previous work concentrates on the US; we extend these studies to the different institutional framework represented by West Germany, France, the UK, and Switzerland. The observation that managers smooth dividend changes in relation to changes in permanent earnings (MARSH/MERTON [1987]) seems also to be true for European countries. The hypothesis of a long-run target payout ratio is tested by estimating cointegrated processes. Integration of the same order for both series is a necessary condition for this hypothesis to hold. We use a recent test strategy proposed by PERRON [1988] to test for a unit root in the time series. There is evidence for non-stationary nominal and real logarithmic capitalization as well as real log dividend series, whereas the logarithm of nominal dividends is stationary. Cointegration is therefore tested only for real magnitudes. On the 5% percent significance level non-cointegration can be rejected only for the UK. This finding casts doubt on the validity of earlier tests derived from specific error correction formulations, such as the MARSH/MERTON [1987] dividend model.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Article provided by Swiss Society of Economics and Statistics (SSES) in its journal Swiss Journal of Economics and Statistics.

    Volume (Year): 129 (1993)
    Issue (Month): II (June)
    Pages: 99-122

    in new window

    Handle: RePEc:ses:arsjes:1993-ii-1
    Contact details of provider: Postal:
    c/o SNB/BNS, B├Ârsenstrasse 15, PO Box 2800, CH-8022 Z├╝rich

    Phone: +41 58 631 32 34
    Web page:

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:ses:arsjes:1993-ii-1. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Steiner)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.