Dividend Multifactor Process, Long-run Risk and Payout Ratios [r-libre/1574]

Bergeron, Claude; Gueyie, Jean-Pierre, & Sedzro, Komlan (2015). Dividend Multifactor Process, Long-run Risk and Payout Ratios. American Journal of Finance and Accounting, 4 (2), 172-191. https://doi.org/10.1504/AJFA.2015.072597

File(s) available for this item:

PDF - tRlibreAJFA2015Inderscience.pdf
Content : Accepted Version

Download

Item Type:	Journal Articles
Refereed:	Yes
Status:	Published
Abstract:	The purpose of this paper is to examine the theoretical relationship between the multidimensionality of risk and dividend policy, in an intertemporal context. After assuming that dividends are generated by a multifactor process, we use the fundamental framework of the consumption capital asset pricing model to explore the effect of long-run risk on dividend payout ratios (dividends divided by earnings). Our approach is similar to any multifactor model that, given the N factor process, derives useful equilibrium conditions. Our main result shows that the dividend payout ratio is negatively related to N sensitive coefficients, given by the long-run covariance between dividends and economic factors. This suggests that the multidimensionality of long-run consumption risk influences dividend policy. In brief, the model proposes that the target payout ratio can be determined with a simple and easy-to-apply formula that takes into account the long-run sensitivity of dividends to various economic factors.
Official URL:	https://www.inderscience.com/info/inarticle.php?ar...
Depositor:	Bergeron, Claude
Owner / Manager:	Claude Bergeron
Deposited:	22 Nov 2018 15:32
Last Modified:	22 Nov 2018 15:32

Actions (login required)

RÉVISER