Lintner's Model

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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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Myers, 2010, "A Lintner Model of Dividends and Managerial Rents," NBER Working paper.
The influence of ownership structure on the firms dividend policy based Lintner model, International Review of Business Research Papers 8(6): 71-88.
Garrett and Priestly (2000) worked on aggregate stock market data of US firms with extended Lintner model and claimed that target dividends are a function of permanent earnings and lagged prices.
He used ordered probit modelling technique, in addition to check speed of adjustment through Lintner model, to check flexibility of dividend policy to certain variables.
298 Table 6 Lintner Model Estimations The estimation results are based on the 660 firm-year observations.
Accordingly, this paper considers the extent to which the Lintner model characterizes the repatriation policies of multinational affiliates, paying particular attention to how foreign earnings translate into dividends.
First, target dividends are related to permanent earnings rather than current earnings, as is done in the extensive literature on the Lintner model (e.
The estimated coefficients of equation (1c) may be interpreted in terms of the Lintner model as follows: The difference between unity and the absolute value of the coefficient of lagged dividends provides an estimate of the 'speed-of-adjustment' coefficient.