We investigate the relationship between cost management and dividend payout decisions. Prior studies document that firms with consistent earnings or transitory losses tend to pay out dividends (Skinner and Soltes in Rev Acc Stud 16:1–28, 2011). Ham et al. (J Financ Econ 136: 547–570, 2020) suggest that dividends contain information about the level of permanent earnings. In addition, sales changes influence cost management because cost management has a direct effect on earnings. Prior research shows that when a firm experiences a temporary sales decline, managers are resistant to cutting resources (as quickly as they increase resources when sales grow) due to the expectation that sales will rebound (Anderson et al. J Account Res 41:47–63, 2003). We find that cost stickiness is positively associated with dividend yield. Furthermore, we show that this positive association is concentrated in firms with: (a) selling, general, and administration (SG&A) expenses that creates higher future value; (b) higher ability managers; and (c) no successive sales decreases.
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Univ Toronto, Rotman Sch Management, Struct Finance, 105 St George St, Toronto, ON M5S3E6, CanadaUniv Toronto, Rotman Sch Management, Struct Finance, 105 St George St, Toronto, ON M5S3E6, Canada
Booth, Laurence
Chang, Bin
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Univ Ontario Inst Technol, Fac Business & IT, Oshawa, ON L1H7K4, CanadaUniv Toronto, Rotman Sch Management, Struct Finance, 105 St George St, Toronto, ON M5S3E6, Canada
Chang, Bin
Zhou, Jun
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Dalhousie Univ, Fac Managment, 6100 Univ Ave, Halifax, NS B3H 4R2, CanadaUniv Toronto, Rotman Sch Management, Struct Finance, 105 St George St, Toronto, ON M5S3E6, Canada
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Amer Univ, Kogod Sch Business, Dept Finance & Real Estate, Finance, Washington, DC 20016 USAAmer Univ, Kogod Sch Business, Dept Finance & Real Estate, Finance, Washington, DC 20016 USA
Baker, H. Kent
Chang, Bin
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Univ Ontario Inst Technol, Fac Business & IT, Finance, Oshawa, ON, CanadaAmer Univ, Kogod Sch Business, Dept Finance & Real Estate, Finance, Washington, DC 20016 USA
Chang, Bin
Dutta, Shantanu
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Univ Ontario Inst Technol, Fac Business & IT, Finance, Oshawa, ON, CanadaAmer Univ, Kogod Sch Business, Dept Finance & Real Estate, Finance, Washington, DC 20016 USA
Dutta, Shantanu
Saadi, Samir
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Queens Univ, Queens Sch Business, Finance, Kingston, ON, CanadaAmer Univ, Kogod Sch Business, Dept Finance & Real Estate, Finance, Washington, DC 20016 USA