19
where E
t+1
represents subsequent year’s earnings, and E
t
this year’s earnings.
It
was
first
theoretically
proposed
by Arnott
and
Asness
(2003)
that
higher
dividend
payout
ratio
does
signal
high
subsequent
earning
growth.
Using
the
data
from U.S. dividend payment records, they found out that relationship between payout
ratios
and
future
earnings
growth
has
strong positive
statistical
relationship.
Their
research
also
concluded
Black’s
argument
about
the
reluctance
of
the
manager
to
raise
payout
when
they’re
not
optimistic
(because
they posses
private
information
about the firm).
 |