Download or read book Dividend Signaling Costs written by Michel A. Robe and published by . This book was released on 1999 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper rationalizes corporate practices of smoothing the impact of earnings shocks on net dividends, as an optimalmanagerial response to conditions that would otherwise seriously harm the welfare of shareholders. It also shows that the deadweight losses arising from informational asymmetries between managers and firm owners are, surprisingly, significantly smaller than is commonly believed. The major assumptions are that managers face budget constraints, know more than outsiders about corporate sources and uses of internally generated funds, and maximize the current level of their firm's market value rather than its intrinsic value.