Abstract

Preliminary and incomplete. Please do not quote without permission. I have profited enormously from discussions with my supervisor Prof.Ron Giammarino and with the other members of my committee, viz. Prof.Gerry Feltham, Prof.Rob Heinkel and Prof.Burton Hollifield. The responsibility for any errors is This paper, to the best of our knowledge is the first one which models dividend formally in an Principal-Agent paradigm. This model, explains dividend as the component of a screening contract set up by an uninformed principal. Whereas the signalling models typically assume that managers are either entrepreneur-managers or that they desire to maximise some weighted combination of the wealth of shareholders (both current and new), our model does not assume any such thing. Our model assumes that the manager wants to maximise his net wealth and the principal recognises this and sets

Citations