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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.

Suggested Citation

  • Carlos Martins, 2007. "Consistency of Dividend Signalling and Future Maturity Level:Evidence from UK Data," Working Papers de Economia (Economics Working Papers) 40, Departamento de Economia, Gestão e Engenharia Industrial, Universidade de Aveiro.
  • Handle: RePEc:ave:wpaper:402007
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    References listed on IDEAS

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    Keywords

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

    JEL classification:

    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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