EFFECTS OF AGENCY AND TRANSACTION COSTS ON DIVIDEND PAYOUT RATIOS - FURTHER EVIDENCE OF THE AGENCY-TRANSACTION COST HYPOTHESIS

In this study we replicate and extend an agency-transaction cost model of dividend payout previously hypothesized and supported in the literature. We find no statistical difference between the estimated regression model obtained for the original seven-year sample period, 1974-80, and that obtained for our seven-year period, 1981-87. The latter period is characterized by significantly lower inflation, stronger economic growth, and lower taxes. The intertemporal stability of the model suggests that it is useful for predicting dividend payout at the individual firm level.