The asymmetric response of dividends to earnings news

Jinseo Cho*, Matthew Greenwood-Nimmo, Yongcheol Shin

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


We provide new evidence of sign asymmetry in dividend payout policy in the postwar period in the U.S. Using a nonlinear autoregressive distributed lag model, we show that managers: (i) smooth the time-path of dividends relative to earnings; (ii) target a higher long-run payout ratio when earnings increase than when they decrease; and (iii) cut dividends faster than they raise dividends. Our findings are consistent with existing research on the implications of agency problems and signaling effects for payout policy.
Original languageEnglish
Article number103792
Number of pages7
JournalFinance Research Letters
Early online date13 Apr 2023
Publication statusPublished - Jun 2023


  • Payout policy
  • Dividend smoothing
  • Sign asymmetry
  • Two-step estimation

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