This paper uses a dynamic partial equilibrium model to explain a puzzle of dividend smoothing. In contrast to the Modigliani–Miller theory, I show that firm value depends on payout policy. The analysis implies that firms with more stable dividend stream are more valuable. This explains why...

This paper uses a dynamic partial equilibrium model to explain a puzzle of dividend smoothing. In contrast to the Modigliani-Miller theory, I show that firm value depends on payout policy. The analysis implies that firms with more stable dividend policy are more valuable. This explains why...

This paper examines whether dividend policy impacts firm value and find that paying dividends does improve firm value. Panel data regressions suggest that the dividend premium for firms' equity is 27.9% and the dividend premium for firms' assets is 11.0%. The tests using propensity score...