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A Theory of Income and Dividend Smoothing Based on Incumbency Rents

  • Fudenberg, Drew
  • Tirole, Jean

"Income smoothing" is the process of manipulating the time profile of earnings or earnings reports to make the reported income stream less variable. This paper builds a theory of income smoothing based on the managers' concern about keeping their position or avoiding interference, and on the idea that current performance receives more weight than past performance when one is assessing the future. When investment is added to the model, so that income reports and dividends can be set independently, we find that both dividends and income reports may be smoothed and that dividends may convey information not present in the income report.

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Paper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 34.

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Date of creation: 1994
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Handle: RePEc:ide:wpaper:4559
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  1. Anonymous, 1993. "Economic forecast overview and summary table," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 56, September.
  2. anonymous, 1993. "Kelley touts economy's underlying strength," Economics Update, Federal Reserve Bank of Atlanta, issue Jan, pages 7.
  3. Anonymous, 1993. "Economic notes," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 56, March.
  4. -, 1993. "Evolución de la economía brasileña," Informe Estadístico – Oficina de la CEPAL en Brasilia 28091, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
  5. Anonymous, 1993. "Contents of Agricultural Economics, Vol. 9," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 9(4), December.
  6. Anonymous, 1993. "Economic notes," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 56, June.
  7. Garnaut, Ross & Ma, Guonan, 1993. "Economic growth and stability in China," Journal of Asian Economics, Elsevier, vol. 4(1), pages 5-24.
  8. Anonymous, 1993. "New Zealand economic chronology 1992," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 56, June.
  9. Anonymous, 1993. "Economic forecasts overview," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 56, March.
  10. Miller, Merton H & Rock, Kevin, 1985. " Dividend Policy under Asymmetric Information," Journal of Finance, American Finance Association, vol. 40(4), pages 1031-51, September.
  11. Anonymous, 1993. "Contents of Agricultural Economics, Vol. 8," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 8(4), June.
  12. -, 1993. "International economic highlights 1992," Oficina de la CEPAL en Washington (Estudios e Investigaciones) 28937, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
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