Dividend smoothing remains a puzzle

Dividend smoothing remains a puzzle for Önancial economists. We present a model in
which smoothing of dividends arises as an equilibrium outcome. A manager who cares
about the intrinsic value of the Örm as well as its current stock price has to decide
how to allocate earnings between investments and dividends. Since the stock price is
determined by uninformed investors, the manager has an incentive to ináate dividends
and lower investment relative to the Örst best. We show that there is a continuum of
equilibria in which the dividend is constant for a range of realized earnings. Compared
to the standard separating equilibrium, this partial pooling induces higher Örm value,
lower average dividends, and lower deviation from the Örst-best investment. We argue
that the previous yearís dividend can serve as a ìfocal point,îallowing managers and
investors to coordinate on just one in a continuum of equilibria. We conclude that
dividend smoothing provides a partial remedy to underinvestment resulting from
information asymmetries. We also o§er several new testable predictions relating
dividend smoothing to investorsímix, managerial incentives, and investment.

Kết quả (Klingon) 1:

dividend Hab ratlh not veHmey 'elDI' önancial economists. ghantoH qaStaHvIS Dan maHvay'mo' chen vay' baS Hab dividends je outcome equilibrium. 'Iv ghojwI'pu'lI' vu'wI' qarwuq ghaj intrinsic nIv örm law' law' 'ay' Qu'mey potlh stock vIHtaHboghDotlh nuq DuqIppu'chugh investments dividends earnings allocate. qaSchoH 'ay' stockqIlmeH pIj pong uninformed investors, incentive ináate dividends ghIq vu'wI'je investment relative to örst neHqu'. 'e' continuum jaS cha' maHearnings tlhoj Hay'DI' dividend choHbe' mIw range vIHechbogh equilibria. comparemotlh equilibrium chev, lo'laHghach örm veb induces partial pooling.ghuS dividends motlhbogh. 'ej ghuS deviation vo' investment örst-neHqu'. ghoH maHvaj laH qo'vaD previous yearís dividend ìfocal lang, îallowing vu'wI' jeQo'noS investors Quv neH wa' neH continuum equilibria. vaj conclude maHpartial remedy, underinvestment ghot'e' vo' DuHIvDI', dividend Habasymmetries De'. maH o§er je puS chu' testable chenpu'DI' 'u' woj law' relating[dividend investorsímix, managerial incentives, investment 'ej. ghaHDaq Hab BERNARDO.