The accuracy of analysts' dividend forecasts around the world |
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| Institution: | 1. Faculty of Business and Economics, Building E4A, Macquarie University, North Ryde, NSW 2109, Australia;2. School of Business, University of Western Sydney, Locked Bag 1797, Penrith, NSW 2751, Australia;1. New York University, New York, NY, USA;2. Temple University, Philadelphia, PA, USA;3. Securities and Exchange Commission, Washington, DC, USA;1. College of Business Administration, University of Nebraska—Lincoln, Lincoln, NE 68588, United States;2. Herberger Business School, Saint Cloud State University, Saint Cloud, MN 56301, United States;1. Shenzhen Audencia Business School, Shenzhen University, Nanhai Ave, Nanshan Qu, Shenzhen, China, 518060;2. Department of Finance and Decision Sciences, Hong Kong Baptist University, Kowloon Tong, Hong Kong China |
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| Abstract: | We examine the link between the accuracy of consensus analysts' dividend forecasts, earnings predictability and dividend policies of firms in 39 countries from 1995 to 2004. For firms that display stronger dividend smoothing, as modeled by Lintner Lintner, J., 1956. Distribution of incomes of corporations among dividends, retained earnings and taxes. American Economic Review 46, 97–113], there is a lower correlation between dividend and earnings forecast errors, with less of the earnings uncertainty being passed into dividend uncertainty. The link between earnings and dividend forecast errors is weaker in common-law, capital market-based countries and in countries with well-developed financial (debt and equity) markets, where firm managers have greater incentives to smooth dividends and to use dividends for signaling. |
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