A Survey of Management Views on Dividend Policy.

A Survey of Management Views on Dividend Policy Author(s): H. Kent Baker, Gail E. Farrelly, Richard B. Edelman Source: Financial Management, Vol. 14, No. 3 (Autumn, 1985), pp. 78-84 Published by: Blackwell Publishing on behalf of the Financial Management Association International Stable URL: http://www.jstor.org/stable/3665062 . Accessed: 01/07/2011 22:31 Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp.. JSTOR's Terms and Conditions of Use provides, in part, that unless http://www.jstor.org/page/info/about/policies/terms.jsp you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at . http://www.jstor.org/action/showPublisher?publisherCode=black . . Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of  content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected].

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Survey Dividend

Management i e w s Policy

H. Kent Baker, Gail E. Farrelly, and Richard B. Edelman ProfessorsBaker and Edelmanare at the Kogod College of Business Administration,TheAmerican University, Washington,D.C. and ProfessorFarrelly is at RutgersUniversity,Newark, New Jersey.

I. Introduction The effect of dividend policy on corporation's marketvalue is subject of long-standingcontroversy. Black [2, p. 5] epitomizes the lack of consensus by stating"The harderwe look at the dividend picture, the more it seems like a puzzle, with pieces that just don't fit together." Because the academic community has been unable to provide clear guidance aboutdividend policy, a shift in emphasis is proposed. In the spirit of Lintner'sseminal work [II], we asked sample of corporate financial managers what factors they considered most important in determining their firm's dividend policy. Our objectives were as follows: (i) to compare the determinantsof dividend policy today with Lintner's behavioral model of corporate dividend policy and to assess management's agreement with Lintner's findings; (ii) to examine management'sperceptionof signaling and clientele effects; and

(iii) to determine whether managers in different industries share similar views about the determinants of dividend policy.' The remainingportion of this paper consists of three sections. Section II sets forth th survey design. Section III presents the research findings and compares them with theory and other empirical evidence. Section IV discusses conclusions and limitations of the study. Because research on dividend policy is already well documented [3], separate section on the dividend literature is not provided. Instead, relevant aspects of the literatureare incorporated nto Section III.

II. Survey Design

The firms surveyed were listed on the New York Stock Exchange (NYSE) and classified by four-digit 'Whether ndustry egulation nfluencesdividendpolicy is a potentially rich ssue, since it is quiteconceivablethatregulation reates ncentives for management adopt a different payout policy than nonregulated firms. Althoughbriefly addressed in this article, this issue examined elsewhere by Edelman, Farrelly, and Baker [61.

Theauthorswish to express theirappreciation o RobertA. Taggartand the two anonymousreferees for their helpful suggestions. 78

79

BAKER,FARRELLY,DELMAN/A URVEYON DIVIDENDPOLICY

Exhibit 1. Major Determinants of Corporate Dividend Policy Level of Importance Determinant Anticipated level of firm's future earnings

9 Pattern of past dividends

Availability of cash

None Slight 0

MaxiStandard X2 Great mum DeviProba3 Mean Rank ation bility Industry

3.40% 1.75 1.75

6.80% 14.04 7.89

89.80% 84.21 90.35

3.20 3.12 3.21

6.12 1.75 2.63

29.25 29.82 25.44

64.63 68.42 71.93

2.73 2.86 2.94

14.29 22.81

22.45 21.05

34.51

63.27 56.14

44.25

2.70 2.42

13.61 15.79 3.51

44.22 28.07 22.81

42.18 56.14 73.68

2.30 2.47 2.96

21.24 7 Concernabout maintainingor increasing stock price

Moderate

2.35

1

.4572*

1

.74 .71 .66

Mfg W/R Util

2 3

.89 .74 .78

.4390*

Mfg W/R Util

3

1.04 1.15

1.02 .87 .85 .79

.0273t

.0001t

Mfg W/R

Util

Mfg W/R Util

*An asterisk ndicates inadequatecell size and the chi-squaretest may not be valid. tUnderlining indicates a significant relationshipat the .05 level of significance. wholesale/retail;Util utility. Mfg manufacturing;W/R

Standard ndustrialClassification (SIC) codes. total of 562 NYSE firms were selected from three industry groups:utility (150), manufacturing 309), and wholesale/retail (103). A mail questionnairewas used to obtain information about corporate dividend policy. The questionnaire consisted of three parts: (i) 15 closed-end statements about the importanceof various factors that each firm used in determining its dividend policy; (ii) 18 closedend statements about theoretical issues involving corporate dividend policy, and (iii) respondent's profile including such items as the firm's dividends and earnings per share. pilot test of the preliminary questionnaire was conducted among 20 firms selected from the three industrygroups but not included in the final sample of 562 firms. The final survey instrumentwas then sent to the chief financial officers (CFOs) of the 562 firms, followed by a second complete mailing to improve the response rate and reduce potential nonresponse bias. The survey, which was conducted during the period between February and April 1983, did not require firms to identify themselves. The survey yielded 318 usable responses (a 56.6% response rate), which were divided among the three industrygroups as follows: 114 utilities (76.0%), 147 manufacturing irms (47.6%), and 57 wholesale/retail (55.3%). Based on dividend and earnings per share data provided by the respondents, the 1981 average

dividend payout ratios were computed. The payout ratioof the responding utilities (70.3%) was considerably higher than for manufacturing (36.6%) and wholesale/retail (36.1%).2

III. Results and Discussion A. Determinants of Dividend Policy

Lintner's classic 1956 study [11] found that major changes in earnings "out of line" with existing dividend rates were the most importantdeterminantof the company's dividend decisions. However, because these managers believed that shareholders preferred steady streamof dividends, firms tended to make periodic partial adjustments toward a target payout ratio ratherthan dramatic changes in payout. Thus, in the 2In theelectric utilitysegment, the dividendpayoutratiocan be distorted by non-cash tems such fundsused duringconstruction (AFUDC). Moody's Public UtilityManualreports hat 1981 (the year surveyed), AFUDC made a substantialcontributionto electric utility net income. In that year, average earnings per share for the industrywas $10.16 from which $7.16 was paid in dividends. This represents averageutilitypayoutof 70.5% incontrastwith34% n the othersegments. If AFUDC is excluded fromnet income, earnings are $4.79 per share. Earningsat this level would represent utility payout ratio of nearly 150%. Firmsin the other industrysegments surveyed also have non-cash items charged or added to their income figure. However, Compustat shows no equivalent items in those segments which are consistently usedby all firmsandhave such a profound ffect on reported ncome. It is ourbelief thatwith or adjustment n the utilitypayoutratio for AFUDC, utilities can be viewed as high payout firms relative to manufacturing nd wholesale/retail irms.

80

short run, dividends were smoothed in an effort to avoid frequent changes. Famaand Babiak's [8] examination of several alternative models for explaining dividend behavior supports Lintner's position that managers increase dividends only after they are reasonably sure that they can permanently maintain them at the new level. To examine how well Lintner's model describes currentpractice, the respondents were asked to indicate the importance of each of 15 factors in determinfive-point ing their firm's actual dividend policy. no for was used this interval scale purpose: equal moderate slight importance, importance, maximum greatimportance, and4 importance, importance. It should be noted that the questionnaire does not follow Lintner's model exactly. Exhibit provides summary statistics on the major determinantsof corporate dividend policy as reported by the three industrygroups.3The results show that the same four determinants (identified later by "D") are consideredmost importantby the three industrygroups when ranked by the mean response. The determinant numbersrepresent the order in which each factor was presented in the questionnaire. The most highly rankeddeterminantsare the anticipated level of a firm's future earnings (Dl) and the pattern of past dividends (D9). The high ranking of these two factors is consistent with Lintner's findings. thirdfactorcited as important determiningdividend policy is the availability of cash (D8). Although Lintnerdoes not directly addressthis determinant,Van Hore [19, p. 23] and Weston and Brigham [20, p. 675] note that liquidity is an important managerial consideration. A fourth major determinantis concern about maintaining or increasing stock price (D7). This concern is particularly trong among utilities who rankedthis factor second in importance. B. Issues Involving Dividend Policy The study's second objective was to investigate CFOs' perceptions of certain specific issues. The respondentswere asked to indicate their general opinion about each of 18 closed-end statements based on strongly disseven-point equal interval scale: slightly moderately disagree, -1 agree, -2 + no slightly agree, + 2 disagree, opinion, 3Summarytatisticson all 15 determinants corporatedividendpolicy are availablefrom the authors.

FINANCIALMANAGEMENT/AUTUMN985

strongly agree. Exmoderately agree, and hibit provides summary statistics on the responses to each of the 18 statements (identified later by "S") for the three industrygroups. The statementnumbersrefer to the order in which the statements appeared in the questionnaire. Attitudes on Lintner's Findings. One issue was the level of agreement with statements supporting Lintner'sresearch findings, namely, S2, S3, S9, S10, and S 17. The results show thatseveral such statements command the highest level of agreement. For example, two of the highest ranked statements were that firm should avoid making changes in its dividend rates that might soon have to be reversed (S10) and should strive to maintain an uninterruptedrecord of dividend payments (S17). Respondents also generally agreed thata firm should have targetpayout ratio and should periodically adjust the payout toward the target (S3). Lintner's field work also suggests that managers focus on the change in the existing rate of dividend payout, not on the dollar amount of dividends (S9) so that investment requirements generally have little effect on modifying the pattern of dividend behavior (S2). On average, managers expressed no strongopinion on either of these statements. Although management's perceptions could differ significantly from actual decisions, the results in Exhibit do not suggest this. That is, managers' views aboutcontinuityof dividend policy seem to be translated into factors (DI and D9) that are in fact consistent with dividend continuity. Attitudes on Theoretical Issues. major controversy in the literatureinvolves the relationship between dividends and value. Miller and Modigliani (MM) [15] suggest that dividend policy has no effect on the value of the corporation in a world without taxes, transaction costs, or other market imperfections. However, dividends may be relevant to the extent that market imperfections exist. Some of the explanations for dividend relevance include signaling and clientele effects. Exhibit 2 shows that respondents from all three industrygroups agreed relatively strongly that dividend payout affects common stock prices (S1). The utilities showed the highest level of agreement with this statement. These results seem consistent with the finding reported Exhibit that concern about maintainingor increasing stock price (D7) is major determinantof corporatedividend policy, especially for utilities. Management attitudes were also sought on several othertheoreticalissues. The first issue involves signal-

81

BAKER,FARRELLY, DELMAN/A URVEYON DIVIDENDPOLICY

Exhibit 2. Issues Involving Corporate Dividend Policy Statement 10 A firm should avoid making changes in its dividendratesthat might have to be reversed year or so. 4 Reasonsfor dividend policy changes should be adequatelydisclosed to investors. 17

firmshouldstriveto maintainan uninterrupted recordof dividend payments. A firm should have a targetpayout ratio and periodicallyadjust the payout towardthe target. Dividend payout affects the price of the common stock.

7 Investorshavedifferentperceptionsof therelative riskinessof dividends and retainedearnings. 14 Dividend paymentsprovide "signaling device" of future prospects. The marketuses dividend announcementsas or assessing security value. change in the existing dividend payout is more important han the actual amountof dividends. stockholder s attracted firms which have dividendpolicies appropriate the stockholder's particular ax environment. 15 Capitalgains expected to result from earnings retentionare riskierthan are dividend expectations. Management houldbe responsive to its shareholders'preferencesregardingdividends.

16

12 Investors low tax bracketsare attracted high-dividend tocks. New capital investmentrequirementsof the firm generally have little effect on modifying the patternof dividend behavior. 11 Stockholders high tax bracketsare attracted low-dividendstocks. Dividend distributions hould be viewed as residualafter financing desired investments rom availableearnings. 13 Financingdecisions should be independentof firm's dividenddecisions. 18 Investorsarebasically indifferentbetweenreturns from dividends versus those from capital gains.

Disagreement -2 -1 0 -3 1.37% 7.02 .00 2.05 .00 .88 1.36 3.51 .00 7.53 3.51 10.53 6.80 7.02 3.51 .69 3.57 1.76 6.80 7.02 7.02 5.52 8.77 5.26 10.27 21.05 34.21 6.85 10.53 6.14 6.29 15.79 9.65 12.33 8.77 7.02 10.96 15.79 9.65 21.92 31.58 24.78 19.31 17.86 14.91 28.08 38.60 61.95 43.54 49.12 38.60 55.48 60.71 76.32

Agreement +3 +1 +2

11.64% 5.26 8.77 20.55 19.30 28.95 25.85 10.53 6.14 29.45 17.54 24.56 39.46 42.11 21.93 45.83 42.86 35.96 38.10 49.12 42.11 55.86 52.63 42.98 49.32 50.88 44.74 58.22 45.61 39.47 58.04 52.63 51.75 54.11 56.14 40.35 63.01 56.14 50.00 38.36 31.58 23.89 57.93 55.36 41.23 36.30 26.32 27.43 27.21 22.81 28.07 38.36 33.93 18.42

*Anasteriskndicatesnadequateell size and he chi-squareest maynotbe valid. tUnderliningndicates significantelationshipt the .05 levelof significance. Mfg manufacturing;/R wholesale/retail;til utility.

86.99% 87.72 91.23 77.40 80.70 70.18 72.79 85.96 93.86 63.01 78.95 64.91 53.74 50.88 74.56 53.47 53.57 62.28 55.10 43.86 50.88 38.62 38.60 51.75 40.41 28.07 21.05 34.93 43.86 54.39 35.66 31.58 38.60 33.56 35.09 52.63 26.03 28.07 40.35 39.73 36.84 51.33 22.76 26.79 43.86 35.62 35.09 10.62 29.25 28.07 33.33 6.16 5.36 5.26

Standard x2 Devi- Probaation Rank Mean bility Industry 2.47 2.16 2.61 2.09 2.14 2.02 1.97 2.28 2.63 1.47 2.09 1.42 1.41 1.46 1.99 1.38 1.34 1.62 1.37 1.18 1.19 1.02 1.07 1.33 .86 .40 -.21 .80 .88 1.37 .76 .51 .85 .68 .91 1.22 .50 .39 .86 .38 .09 .72 .24 .29 .83 .13 -.07 -1.35 -.36 -.58 -.10 1.33 1.46 -1.77

10

12 16 10 10 11 11 12 12 13 13 11 14 15 14 15 14 13 16 16 17 17 17 15 18 18 18

.91 1.46 .77 1.28 1.04 1.09 1.05 1.25 .72 1.50 1.20 1.65 1.02 1.23 1.22 1.04 1.28 1.16 1.35 1.26 1.38 1.29 1.47 1.39 1.60 1.67 1.85 1.32 1.48 1.29 1.37 1.47 1.44 1.52 1.52 1.47 1.41 1.57 1.47 1.88 1.97 2.05 1.56 1.59 1.61 1.97 2.12 1.78 2.12 2.04 2.04 1.50 1.54 1.30

.0155*t .3189* .0001*t .1715 .0059t .3286* .6904 .2040 .000I .0225t .2816 .0240t .1057 .0786 .0075t .0001t .7495 .0103t

Mfg W/R Util Mfg W/R Util Mfg W/R Util Mfg W/R Util Mfg W/R Util Mfg W/R Util Mfg W/R Util Mfg W/R Util Mfg W/R Util Mfg W/R Util Mfg W/R Util Mfg W/R Util Mfg W/R Util Mfg W/R Util Mfg W/R Util Mfg W/R Util Mfg W/R Util Mfg W/R Util

82

ing effects. Managershave access to information about the firm's expected cash flows not possessed by outsiders and thus, changes in dividend payout may provide signals about the firm's future cash flows that cannot be communicatedcredibly by other means. With some exceptions, empirical studies indicate that dividend changes convey some unanticipated nformationto the market [1, 5, 9, 10, 16, 21]. Threestatementsinvolved signaling effects (S4, S5, and S14). The respondents from all three industry groups agreed, on average, that dividend payments provide "signaling device" of future company prospects (S14) and that the market uses dividend announcementsas informationfor assessing security value (S5). The respondents also demonstrated high level of agreement that the reasons for dividend policy changes should be adequately disclosed to investors (S4). Another theoretical issue concerns the extent to which investors with different dividend preferences form clienteles. Two possible reasons for the formation of clienteles are different perceptions of the relative riskiness of dividends and retained earnings and different investor tax brackets. Although the research evidence is mixed, it does learntowardthe existence of clientele effects [7, 12, 171. Seven statementsinvolved clientele effects (S6, S7, S11, S12, S15, S16, and S18) and these commanded mixed agreement. Respondents from all three industry groups thought that investors have different perceptions of the relative riskiness of dividends and retained earnings (S7) and hence are not indifferent between dividendand capital gain returns S 18). Yet, there was only slight agreement that a stockholder is attracted o firms with dividend policies appropriate o that stockholder's tax environment (S16) and that management should be responsive to its shareholders' dividend preferences (S6). However, the utilities differed from the other two groups, expressing significantly higher levels of agreement on S16 and S6. C. Industry Influence on Dividend Policy The study's final objective was to investigate differences in managers' attitudesacross three broad industrygroups. Studies by Dhrymes and Kurz [4], McCabe [13], and Michel [14] have previously detected some effect of industry classification on corporate dividend policy. However, Rozeff [18] concluded that a company's industry does not help to explain its dividend payout ratio. Rozeff's conclusion is not applicable to utilitiessince he intentionally excluded regulatedcom-

FINANCIALMANAGEMENT/AUTUMN985

panies because their policies may be affected by their regulatory status. Chi-squareanalysis was used to test for differences in the responses among the three industry groups. In order to perform these tests and to avoid inadequate cell sizes, both the five-interval importance scale and the seven-interval disagreement-agreementscale were collapsed into three classes as shown in Exhibits and 2, respectively. Nevertheless, some warnings about low cell counts resulted because of the highly skewed nature of the responses. These tests showed that the responses of the three groups differed significantly at the .05 level among eight of the 15 determinants of dividend policy (partly shown in Exhibit 1) and nine of the 18 issues (Exhibit 2). FurtherChi-squaretests were performed using pairwise comparisons between the industry groups on all 15 determinantsand 18 issues. The results revealed that the manufacturingand wholesale/retai firms had no significant differences in responses at the .05 level forthose questions with adequatecell sizes. Hence, the differences occurred primarily as result of the utilities' responses relative to either manufacturing or wholesale/retail. The reported differences between the utilities and the otherfirms may be due to regulation. For example, since regulationgives utilities monopoly power over a product enjoying steady demand, their earnings are comparatively stable. Their risk of having to reduce dividends because of an unexpected decline in earnings is thus less than that for many other companies. It is also plausible that regulation creates incentives for management adopt a different payout policy than nonregulated irms. This incentive may stem from the fact that funds retained inside the firm are implicitly subjectto expropriationby the regulators in future rat cases. Hence, managers of regulated firms may view the world differently than managers operating in competitive environment. On the other hand, the differences may have nothing to do with regulationper se but with other characteristics. For example, Rozeff [18] notes that the apparently significant industry effect found in past studies results from the fact that other variables are often similar within given industry. These similarities are the fundamentalreason why companies in the same industry have similar dividend payouts. Utilities are high payout firms relative to the two other groups and this characteristicmakes them different. To control for dividend payout, the responses by managers in the highest payout quartile for 1981 of

BAKER,FARRELLY,DELMAN/A URVEYON DIVIDENDPOLICY

83

nonregulatedirms(51 firms)werecomparedwiththe utilities 114 firms).4 With a few exceptions, the resultswere strikingly similar o those n Exhibit2. Although hemeanrankingschanged ittle, the responsesof the higherpayout nonregulatedirmsmoreclosely resembledheutilities on two statements namely,dividendpayoutaffects the priceof the commonstock (Si) and management should be responsive to its shareholders'dividend preferencesS6). Overall, the findings suggest that the attitudesof even high-payout onregulatedirmmanagers redifferent romthose of utilitymanagers.Hence, regulation may be responsible or some of the relationsobserved.

industries.Theresultssuggestthatmanagers regulated firms have a somewhatdifferentview of the world hanmanagers perating n a competitive nvironment.Thus, maybe worthwhileo segregate egulated romnonregulatedirmswhen examiningdividendpolicy.

IV. Conclusions

Before drawingany conclusions, several limiting aspectsof this research hould be noted. Survey research ypically nvolvessome non-response ias and although teps were takento ensure high response rate,this study s no exception.The problemof nonresponsebias is potentiallygreatestamong manufacturing irmswhichhadthe lowest responserate. Another limiting factor is that views about dividend policy only from chief financialofficers. AlthoughCFOs' views should reflect the attitudesof top managementmore generally, CFOs are not the only individuals nvolved in dividendpolicy decisions.Finally,coverage s restrictedo threebroad industrygroupsrepresenting nly New York Stock Exchange irms. With these caveats in mind, several conclusions emerge romthis survey. First, the resultsshow that the majordeterminants f dividend paymentstoday appeartrikingly imilar o Lintner'sbehavioralmodel developedduringthe mid-1950's. In particular, espondentswere highly concernedwith dividendcontinuity. Second, the respondents eem to believe thatdividend policy affects sharevalue, as evidencedby the importancettached dividendpolicy in maintaining or ncreasingtockprice.Although he surveydoes not uncover he exact reasons or theirbelief in dividend relevance, t does provideevidence that the respondents are generallyawareof signaling and clientele effects. Finally, the opinions of the respondents rom the utilitiesdiffer markedly rom those of the other two irms re 4Summarytatistics highpayout egulatedndnonregulated availablerom he authors.

References 1. P. Asquith and D. Mullins, Jr., "The Impactof Initiating Dividend Paymentson Shareholders'Wealth,"Journal of Business (January1983), pp. 77-96. 2. F. Black, "The Dividend Puzzle," Journal of Portfolio Management Winter 1976), pp. 5-8. and 3. T. E. Copeland and J. F. Weston, Financial CorporatePolicy, Reading, MA, Addison-Wesley, 1983. 4. P. J. Dhrymes and M. Kurz, "Investment,Dividend, and ExternalFinance Behaviorof Firms," in R. Ferber(ed.), Determinantsof InvestmentBehavior, New York, Columbia University Press, 1967, pp. 427-467. 5. K. M. Eades, "EmpiricalEvidence on Dividendsas a Signal of Firm Value,"Journal of Financial and Quantitative Analysis (November 1982), pp. 471-500. 6. R. B. Edelman, G. E. Farrelly, and H. K. Baker, "Public Utility DividendPolicy: Time for a Change?",Public Utilities Fortnightly (February21, 1985), pp. 26-31. 7. E. J. Elton andM. J. Gruber,"MarginalStockholderTax Ratesand the Clientele Effect," Review of Economics and Statistics (February1970), pp. 68-74. 8. E. F. Fama andH. Babiak, "DividendPolicy: An Empirical Analysis," Journal of the AmericanStatisticalAssociation (December 1968), pp. 1132-1161. 9. C. Kwan, "Efficient Market Tests of the Informational Contentof Dividend Announcements:Critiqueand Extension," Journal of Financial and Quantitative Analysis 193-206. (June 1981), 10. P. M. Laub, "Onthe InformationalContentof Dividends," Journal of Business (January1976), pp. 73-80. 11. J. Lintner, "Distribution of Incomes of Corporations Among Dividends, RetainedEarningsand Taxes," American EconomicReview (May 1956), pp. 97-113. 12. R. H. Litzenbergerand K. Ramaswamy, "The Effect of Personal Taxes and Dividends on Capital Asset Prices: Theory and Empirical Evidence," Journal of Financial Economics (June 1979), pp. 163-196. 13. G. M. McCabe, "TheEmpiricalRelationshipBetween Investmentand Financing: New Look," Journal of Financial and QuantitativeAnalysis (March 1979), pp. 119-135. 14. A. Michel, "Industry nfluence on Dividend Policy," Financial Management(Autumn 1979), pp. 22-26. 15. M. H. Miller and F. Modigliani, "Dividend Policy, Growth,and Shares,"Journal of Business 411-433. (October 1961), pp. 16. S. H. Penman, "The PredictiveContent of EarningsForecasts and Dividends," Journal of Finance (September 1983), pp. 1181-1199.

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FINANCIALMANAGEMENT/AUTUMN 985

17. R. R. Pettit, "Taxes, TransactionsCosts and Clientele Effects of Dividends,"Journal of Financial Economics (December 1977), pp. 419-436. 18. M. S. Rozeff, "Growth,Beta and Agency Costs as Determinantsof Dividend Payout Ratios,"Journal of Financial Research (Fall 1982), pp. 249-259. 19. J. C. Van Home, Financial Managementand Policy, 6th

ed., Englewood Cliffs, NJ, Prentice-Hall, 1983. 20. J. F. WestonandE. F. Brigham,ManagerialFinance, 7th ed., Hinsdale, IL, Dryden Press, 1981. 21. J. R. Woolridge, "The InformationContent of Dividend Changes,"Journal of Financial Research (Fall 1982), pp. 237-247.

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