The dividend puzzle misspecification – Why the role of dividends is not what people think
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...
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| Format: | Article |
| Language: | English |
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Taylor & Francis Group
2019-01-01
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| Series: | Cogent Economics & Finance |
| Subjects: | |
| Online Access: | http://dx.doi.org/10.1080/23322039.2019.1649000 |
| _version_ | 1818957265498013696 |
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| author | Shreyansh Goyal |
| author_facet | Shreyansh Goyal |
| author_sort | Shreyansh Goyal |
| collection | DOAJ |
| 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. |
| first_indexed | 2024-12-20T11:07:06Z |
| format | Article |
| id | doaj.art-2c3122bd256842e2a3631cc967ff071c |
| institution | Directory Open Access Journal |
| issn | 2332-2039 |
| language | English |
| last_indexed | 2024-12-20T11:07:06Z |
| publishDate | 2019-01-01 |
| publisher | Taylor & Francis Group |
| record_format | Article |
| series | Cogent Economics & Finance |
| spelling | doaj.art-2c3122bd256842e2a3631cc967ff071c2022-12-21T19:42:51ZengTaylor & Francis GroupCogent Economics & Finance2332-20392019-01-017110.1080/23322039.2019.16490001649000The dividend puzzle misspecification – Why the role of dividends is not what people thinkShreyansh Goyal0University of DelhiThe 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.http://dx.doi.org/10.1080/23322039.2019.1649000dividend puzzleagency costsinvariancedividend preferencemarket efficiencymarket cyclesharmoniserole of dividendsusindia |
| spellingShingle | Shreyansh Goyal The dividend puzzle misspecification – Why the role of dividends is not what people think Cogent Economics & Finance dividend puzzle agency costs invariance dividend preference market efficiency market cycles harmonise role of dividends us india |
| title | The dividend puzzle misspecification – Why the role of dividends is not what people think |
| title_full | The dividend puzzle misspecification – Why the role of dividends is not what people think |
| title_fullStr | The dividend puzzle misspecification – Why the role of dividends is not what people think |
| title_full_unstemmed | The dividend puzzle misspecification – Why the role of dividends is not what people think |
| title_short | The dividend puzzle misspecification – Why the role of dividends is not what people think |
| title_sort | dividend puzzle misspecification why the role of dividends is not what people think |
| topic | dividend puzzle agency costs invariance dividend preference market efficiency market cycles harmonise role of dividends us india |
| url | http://dx.doi.org/10.1080/23322039.2019.1649000 |
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