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Title: Why are aggregate dividend payments procyclical?
Authors: Huang-Meier, Winifred (Shih-Yun)
Freeman, Mark
Mazouz, Khelifa
Keywords: Dynamic stochastic general equilibrium economies
Payout policy
Business fluctuations
Firm objectives
Capital adjustment costs
Issue Date: 2015
Publisher: © Elsevier Ltd.
Citation: HUANG-MEIER, W., FREEMAN, M. and MAZOUZ, K., 2015. Why are aggregate dividend payments procyclical? Journal of Macroeconomics, 44, pp.98-108.
Abstract: We use two general equilibrium models to explain why changes in the external economic environment result in pro-cyclical aggregate dividend payout behavior. Both models that we consider endogenize low elasticity of investment. The first model incorporates capital adjustment costs, while the second one assumes that risk-averse managers maximize their own objective function rather than 1 shareholder wealth. We show that, while both models generate pro-cyclical aggregate dividends, a feature consistent with the observed business-cycle pattern of payouts from well-diversified portfolios, the second model provides a more likely explanation for this effect. Our findings emphasize the importance of incorporating agency conflicts when considering the relationship between the external economic environment and the financial behavior of businesses.
Description: This article was accepted for publication in the Journal of Macroeconomics [© Elsevier Ltd.] and the definitive version is available at: http://dx.doi.org/10.1016/j.jmacro.2015.01.005
Version: Accepted for publication
DOI: 10.1016/j.jmacro.2015.01.005
URI: https://dspace.lboro.ac.uk/2134/16714
Publisher Link: http://dx.doi.org/10.1016/j.jmacro.2015.01.005
ISSN: 1873-152X
Appears in Collections:Published Articles (Business School)

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