This paper presents a two-period model in which dividends act as a signal of the stability of the firm's future cash flows. It is demonstrated that firms with more stable future cash flows pay a higher dividend. Dividends are a credible signal because the promise of a higher dividend, ceteris...

In this paper the choice of risky debt maturity structure is analyzed in a sequential game framework. The focus is on the set of viable equilibria when there are not transaction costs associated with the choice of debt maturity structure. It is shown that when changes in firm value are...