Lintner's Model

Lintner's Model

A model theorizing how a publicly-traded company sets its dividend policy. The model states that dividends are paid according to two factors. The first is the net present value of earnings, with higher values indicating higher dividends. The second is the sustainability of earnings; that is, a company may increase its earnings without increasing its dividend payouts until managers are convinced that it will continue to maintain such earnings.
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Ahmed and Javaid (2009) observed determinants of dividend policy in Pakistan along with testing of Lintner's model of dividend soothing using panel data of 320 non-financial firms.
2010) in Oman by working on a selected sample firms using Lintner's model.
Authors tested extended Lintner's model using GMM estimator for data of 571 firms over a period of 8 years.
The dummy variable approach is the used to test for any structural shift in the Lintner's model due to the regulatory change in taxes.
To detect whether a structural shift in the Lintner's model due to the 1996 tax imposition on distributed cash dividends, we introduced dummy variables into the model.
t] denotes the dividend payout at date t, then Lintner's model assumes that [DELTA][d.