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Dividend policy irrelevancy and the construct of earnings

Research output: Contribution to Journal/Magazine › Journal article › peer-review

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Dividend policy irrelevancy and the construct of earnings. / Gao, Zhan; Ohlson, James; Ostaszewski, Adam.
In: Journal of Business Finance and Accounting, Vol. 40, No. 5-6, 06.2013, p. 673-694.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

Gao, Z, Ohlson, J & Ostaszewski, A 2013, 'Dividend policy irrelevancy and the construct of earnings', Journal of Business Finance and Accounting, vol. 40, no. 5-6, pp. 673-694. https://doi.org/10.1111/jbfa.12019

APA

Gao, Z., Ohlson, J., & Ostaszewski, A. (2013). Dividend policy irrelevancy and the construct of earnings. Journal of Business Finance and Accounting, 40(5-6), 673-694. https://doi.org/10.1111/jbfa.12019

Vancouver

Gao Z, Ohlson J, Ostaszewski A. Dividend policy irrelevancy and the construct of earnings. Journal of Business Finance and Accounting. 2013 Jun;40(5-6):673-694. Epub 2013 May 14. doi: 10.1111/jbfa.12019

Author

Gao, Zhan ; Ohlson, James ; Ostaszewski, Adam. / Dividend policy irrelevancy and the construct of earnings. In: Journal of Business Finance and Accounting. 2013 ; Vol. 40, No. 5-6. pp. 673-694.

Bibtex

@article{e2131747768546fd83270275b2ddea0a,
title = "Dividend policy irrelevancy and the construct of earnings",
abstract = "This paper analyzes the characteristics of earnings in valuation settings where the dividend policy is irrelevant to equity value. The paper first demonstrates an equivalent characterization of dividend policy irrelevancy (DPI) in a general linear dynamic. It then proceeds to show how DPI leads to ideal and practical constructs of earnings and examines their analytical properties. We further demonstrate that earnings properties can be used to deduce the core approach in practical equity valuation; namely, measures of growth in expected earnings explain the price to forward earnings ratio. However, unlike dividends, free cash flow cannot generally be claimed to be irrelevant.",
keywords = "dividend policy, earnings, equity valuation, information dynamics",
author = "Zhan Gao and James Ohlson and Adam Ostaszewski",
year = "2013",
month = jun,
doi = "10.1111/jbfa.12019",
language = "English",
volume = "40",
pages = "673--694",
journal = "Journal of Business Finance and Accounting",
issn = "0306-686X",
publisher = "Wiley-Blackwell",
number = "5-6",

}

RIS

TY - JOUR

T1 - Dividend policy irrelevancy and the construct of earnings

AU - Gao, Zhan

AU - Ohlson, James

AU - Ostaszewski, Adam

PY - 2013/6

Y1 - 2013/6

N2 - This paper analyzes the characteristics of earnings in valuation settings where the dividend policy is irrelevant to equity value. The paper first demonstrates an equivalent characterization of dividend policy irrelevancy (DPI) in a general linear dynamic. It then proceeds to show how DPI leads to ideal and practical constructs of earnings and examines their analytical properties. We further demonstrate that earnings properties can be used to deduce the core approach in practical equity valuation; namely, measures of growth in expected earnings explain the price to forward earnings ratio. However, unlike dividends, free cash flow cannot generally be claimed to be irrelevant.

AB - This paper analyzes the characteristics of earnings in valuation settings where the dividend policy is irrelevant to equity value. The paper first demonstrates an equivalent characterization of dividend policy irrelevancy (DPI) in a general linear dynamic. It then proceeds to show how DPI leads to ideal and practical constructs of earnings and examines their analytical properties. We further demonstrate that earnings properties can be used to deduce the core approach in practical equity valuation; namely, measures of growth in expected earnings explain the price to forward earnings ratio. However, unlike dividends, free cash flow cannot generally be claimed to be irrelevant.

KW - dividend policy

KW - earnings

KW - equity valuation

KW - information dynamics

U2 - 10.1111/jbfa.12019

DO - 10.1111/jbfa.12019

M3 - Journal article

VL - 40

SP - 673

EP - 694

JO - Journal of Business Finance and Accounting

JF - Journal of Business Finance and Accounting

SN - 0306-686X

IS - 5-6

ER -