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Large dividend increases and leverage
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DOI：10.1016/j.jcorpfin.2017.10.011.png)
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Abstract
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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. (C) 2017 Elsevier B.V. All rights reserved.
Keywords:
Capital structure
Dividend policy
Dividend changes
Leverage
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