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The dividend puzzle misspecification – Why the role of dividends is not what people think

Cogent economics & finance, 2019, Vol.7 (1), p.1-55 [Peer Reviewed Journal]

2019 The Author(s). This open access article is distributed under a Creative Commons Attribution (CC-BY) 4.0 license. 2019 ;2019 The Author(s). This open access article is distributed under a Creative Commons Attribution (CC-BY) 4.0 license. This work is licensed under the Creative Commons Attribution License http://creativecommons.org/licenses/by/4.0/ (the “License”). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License. ;ISSN: 2332-2039 ;EISSN: 2332-2039 ;DOI: 10.1080/23322039.2019.1649000

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  • Title:
    The dividend puzzle misspecification – Why the role of dividends is not what people think
  • Author: Goyal, Shreyansh
  • Yang, Zhaojun
  • Subjects: agency costs ; Deviation ; Dividend distributions ; dividend preference ; dividend puzzle ; Dividends ; Efficacy ; harmonise ; India ; invariance ; Justification ; market cycle ; market cycles ; market efficiency ; Markets ; role of dividend ; role of dividends
  • Is Part Of: Cogent economics & finance, 2019, Vol.7 (1), p.1-55
  • Description: The dividend payout problem in literature has largely been misspecified. The roles of dividends as signals, agency cost reducers, fixed income providers or even the invariance of dividend payouts are all phenomenon that, based on market conditions, follow from the role of dividends as equalizers of firm value, discounted from a given point in time, across firm's life. In this study, I discuss few problems with prevalent approaches towards solving dividend puzzle in academia, provide justification for the aforementioned hypothesis based on few assumptions, derive a model applicable under ideal conditions and then measure the deviations from the ideal model in two market indices-Nifty 500 (India) and S&P 500 (USA). The results obtained are then compared with the studies already done on these market and the reasons for deviation are discussed. Once the dividend model is derived, all roles of dividend flow automatically from the primary role of dividends and the extent of efficacy of each of the secondary role is based on numerous factors which vary, giving different results across different studies. The empirical investigation gives a view of these different factors at work in the markets.
  • Publisher: Abingdon: Taylor & Francis
  • Language: English
  • Identifier: ISSN: 2332-2039
    EISSN: 2332-2039
    DOI: 10.1080/23322039.2019.1649000
  • Source: Taylor & Francis Open Access
    ROAD: Directory of Open Access Scholarly Resources
    ProQuest Central
    DOAJ Directory of Open Access Journals
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