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Title:Behavioral dividend policy PDF Logo
Authors:Gürtler, Marc
Hartmann, Nora
Issue Date:2003
Series/Report no.:Working papers // Institut für Finanzwirtschaft, Technische Universität Braunschweig FW04V1
Abstract:In this paper we develop an optimal dividend policy in the presence of limited rational inves-tors. Concretely, investors with mental accounts for dividends and stock prices as well as emotions like disappointment and elation embody the limited rationality. Furthermore, investors evaluate changes in wealth instead of final wealth. A management maximizing investors' modified utility results in the optimality of dividend payments as well as dividend smoothing, which both have long been puz-zles to financial theorists. Moreover, a model specification leads to a gradual dividend adjustment to changes in net earnings as described by Lintner (1956).
Subjects:dividend policy
dividend smoothing
behavioral finance
JEL:G35
Document Type:Working Paper
Appears in Collections:Working Paper Series, Institut für Finanzwirtschaft, TU Braunschweig

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