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Lintner’s Dividend Partial Adjustment Model on Aggregate Data. The Case of the Warsaw Stock Exchange
Abstract
The partial adjustment model developed by Lintner, which assumes that the dividend paid for year t is dependent on net profit in year t and on the dividend paid in year t − 1, and used to assess the dividend policy of individual companies as well as entire markets and their sectors, is most often estimated on the basis of data from selected companies. Additionally, estimations of the model typically only consider observations in which a dividend payment was recorded. Because this selection is not random, it limits the possibility of correctly assessing the dividend policy implemented in the analyzed markets. Therefore, the article hypothesizes that the dividend policy of a given market will be better described by the Lintner model estimated on the aggregate sums of payments and profits of all companies paying dividends than by one estimated on the panel data of selected companies. The hypothesis was verified using models estimated with aggregate data from the Warsaw Stock Exchange for the years 1992–2024. The source of information on dividends and profits was resolutions of the Ordinary (or, much less often, Extraordinary) General Meetings of Shareholders, adopted by all companies that paid at least one dividend during while listed on the Warsaw Stock Exchange.
Keywords:
Lintner’s dividend partial adjustment model, dividend and profit aggregate data, instrumental variable method, Warsaw Stock ExchangeMost read articles by the same author(s)
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