engleski

Divident smoothing asymmetry on Zagreb Stock Exchange

Even though dividends are a frequently analysed matter, they are still considered to be one of the most interesting and intriguing issues in modern financial literature. This is once again proven by Brealy and Myers who, at the beginning of the 21st century, put dividends among ten most important unresolved concerns of modern finance. One of the quintessential papers dealing with dividends is John Lintner’s paper written in 1956 which, according to many economic theorists, gives basis for modern dividend policy. His work presented an econometric model of conclusions drawn from research made by analysing managers making decisions about dividend payout. Lintner has set postulations regarding dividend behaviour according to which dividends are a function of long-term sustainable earnings. As stated by Lintner (1956), managers are trying to manage dividends. In doing so, the managers try to smooth dividends or mitigate dividend volatility compared to earnings volatility attain. Companies have target dividend payout ratios. The change in dividends follows the changes in the company’s earnings, with the managers not willing to reduce dividends unless they are forced to do so. The Linter model assumes that companies are smoothing dividends to their target dividend payout ratios at the same speed, regardless of whether the dividend is above or below the target payout ratio. The aim of this paper is to reject the assumption of symmetric dividend movement and to investigate if there is dividend smoothing asymmetry depending on whether the paid dividend is above or below the target payout ratio. In this paper, the authors have followed Lintner (1956) approach using regression analysis conducted in STATA. The sample consists of joint stock companies listed on the Zagreb Stock Exchange (ZSE) that have, in the period from 2003 to 2018, paid out a dividend for at least four consecutive years.

dividends ; dividend smoothing ; dividend behaviour ; Zagreb Stock Exchange

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