TY - JOUR
T1 - Corporate payout smoothing
T2 - A variance decomposition approach
AU - Hoang, Edward C.
AU - Hoxha, Indrit
N1 - Publisher Copyright:
© 2015 Elsevier B.V.
PY - 2016/1/1
Y1 - 2016/1/1
N2 - In this paper, we apply a variance decomposition methodology to quantify the smoothness of corporate payouts. We find that firms use debt and investment to smooth a large fraction of shocks to net income to keep payouts less variable. Specifically, our empirical results show that firms keep the growth of payouts relatively small and stable over time. Furthermore, our findings support theoretical work that demonstrates that the dynamics of investment and debt policy should be jointly modeled with payout policy.
AB - In this paper, we apply a variance decomposition methodology to quantify the smoothness of corporate payouts. We find that firms use debt and investment to smooth a large fraction of shocks to net income to keep payouts less variable. Specifically, our empirical results show that firms keep the growth of payouts relatively small and stable over time. Furthermore, our findings support theoretical work that demonstrates that the dynamics of investment and debt policy should be jointly modeled with payout policy.
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U2 - 10.1016/j.jempfin.2015.10.011
DO - 10.1016/j.jempfin.2015.10.011
M3 - Article
AN - SCOPUS:84948437170
SN - 0927-5398
VL - 35
SP - 1
EP - 13
JO - Journal of Empirical Finance
JF - Journal of Empirical Finance
ER -