Dividend persistence and dividend behaviour

Kam Fong Chan, John G. Powell, Jing Shi, Tom Smith

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

This article demonstrates how a spurious regression problem caused by
dividend persistence is compounded by a spurious correlation problem when
the dependent and independent variables in dividend behaviour regressions are
ratios composed of common component variables. This article utilises a
simulation procedure to take account of these problems, with the findings
implying that extreme care should be taken when using ratios as predictor or
explanatory variables in time series regression. This article introduces a
reformulated Lintner first difference dividend behaviour model that is not
subject to spurious regression in which past prices predict subsequent changes
in dividends.
Original languageEnglish
Pages (from-to)127-147
Number of pages21
JournalAccounting and Finance
Volume58
Issue number1
DOIs
Publication statusPublished - Mar 2018
Externally publishedYes

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Keywords

  • dividend behaviour
  • dividend persistence
  • spurious regression and correlation

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