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Dividend and Share Changes: Is There a Financing Hierarchy?
The most widely accepted empirical dividend model is that proposed by Lintner, who argued that firms smooth dividends over time. Many theoretical dividend models, however, either predict that dividends should be highly variable, or at least offer no support for the smoothing hypothesis. We use a switching regression model to test the Lintner model against an alternative which allows dividend behavior to differ depending upon whether or not firms are issuing shares. We reject the Lintner model,doi:10.3386/w2029 fatcat:pkksygbfufb3xcypmsxmz2kuje