Large dividend increases and leverage

Cooper, I A and Lambertides, N (2018) Large dividend increases and leverage. Journal of Corporate Finance, 48. pp. 17-33. ISSN 0929-1199 OPEN ACCESS


This study documents the fact that large dividend increases are followed by a significant increase in leverage, consistent with management increasing the dividend to use up excess debt capacity. However, the leverage increase is not captured by a standard partial adjustment model of leverage. Nor does it reflect variables known to be related to dividend increases, such as firm maturity, investment, and risk. Instead, the dividend increase signals a complex change in the way firms adjust to their leverage target, but it does not signal a change in the target.

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Item Type: Article
Subject Areas: Finance
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© 2017 Elsevier B.V.

Date Deposited: 01 Nov 2017 17:11
Date of first compliant deposit: 25 Oct 2017
Subjects: Dividends
Capital theory
Last Modified: 17 Apr 2024 00:45
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