Modelling Japanese firms’ dividend payout policies using new data

Venue

2024 Meeting of the World Finance & Banking Symposium, Abu Dhabi School of Management

Date

December 2024

Location

Abu Dhabi, United Arab Emirates


Abstract

Despite voluminous empirical research and numerous theoretical contributions, the “dividend puzzle” persists. An impediment to understanding why firms pay dividends and how much to pay is the lack of data on firms’ widely hypothesised dividend payout targets. Researchers have relied on limited survey data collected at a point in time, over a short period, or by using realised dividend payout ratios. This research builds a novel database of voluntary numerical medium-term forward-looking dividend payout target disclosures made by Japanese firms in their Annual Securities Reports. Text analysis methods are employed to extract a panel of data on firms’ targets. This data is unique as medium-term targets are not disclosed systematically elsewhere to my knowledge. I examine the characteristics of the target disclosures in the time series and cross section, the financial characteristics of the firms that voluntarily disclose targets, and use the targets to examine dividend smoothing and the speed of dividend adjustment.


Keywords

Disclosure, Dividend policy, Dividend smoothing, Japanese corporations, Lintner model, Payout targets, Speed of adjustment.


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