Michaely, Roni; Rossi, Stefano; Weber, Michael - 2017 - This version: October 2017
dividends. We show both theoretically and empirically that dividends signal safer, rather than higher, future profits. Using the … model's predictions, cash-flow volatility changes in the opposite direction from that of dividend changes and larger changes … supports the prediction - unique to our model - that the cost of the signal is foregone investment opportunities. We conclude …