Speed of Adjustment in Dividend Payout Decisions

The study examines the phenomenon of dividend smoothing. Tests on a cross-country analysis including more than 4000 companies from 40 countries show the existence of dividend smoothing and indicate the speed of adjustment equal to 64.8%. The analysis also presents that speed of adjustment to higher dividend level is significantly lower in comparison to speed of adjustment to lower dividend level. The further investigation of the phenomenon of difference in speed of adjustment allows coming to conclusion that speed of adjustment in the group with dividend fall lower than 25% significantly differ from the whole sample. The speed of adjustment in the group with dividend fall lower than 25% is approximately equal to 100% while the other sample shows the speed of adjustment equal to 37%. The research also includes the investigation of firms’ parameters which determine the speed of adjustment. This analysis depicts that speed of adjustment can be explained from the theory of information asymmetry point of view.