Le comportement (document en anglais)

more support (16.6%). Again, while we might not expect managers to admit public destruction

of value even in an anonymous survey, these findings suggest there is more to the story than the

economic mechanisms driving well-known signaling models such as Bhattacharya (1979), Miller

and Rock (1985), John and Williams (1985), Kumar (1988), Bernheim (1991), Allen, Bernardo,

and Welch (2000), and Guttman, Kadan, and Kandel (2010).

In this paper we use prospect theory of Kahneman and Tversky (1979) to motivate a

signaling model of dividend policy with behavioral foundations. We focus on two features of the

prospect theory value function. We use the concept of reference-dependence: values and

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perceptions are based on losses and gains relative to a reference point. We also assume loss

aversion: there is a kink at the reference point whereby marginal utility is discontinuously lower

in the domain of losses. Reference-dependence and loss aversion are supported by a considerable

literature in psychology, finance and economics, as we briefly review later.

The essence of our stylized model is that investors evaluate current dividends against a

psychological reference point established by past dividends. Because investors are particularly

disappointed when dividends are cut, dividends can credibly signal information about earnings.

The model is inherently multiperiod, which leads to more natural explanations for the survey

results above and other facts about dividend policy such as the Lintner partial-adjustment model,

which emerges in equilibrium, and which static signaling models cannot address. While it is

difficult to measure investor utility functions per se outside the laboratory, we perform some

novel tests that get at the core intuitions of the approach.

To provide a bit more detail, the model uses reference point preferences as the

mechanism for costly signaling. The manager’s utility function reflects both a preference for a

high stock price today and for avoiding a dividend cut in the future. In the first period, the

manager inherits an exogenous reference level dividend, and receives private information about

earnings. The manager balances the desire to signal current earnings by paying higher dividends

with the potential cost of not being able to meet or exceed a new and higher reference point

through the combination of savings from the first period and random second-period earnings. In

equilibrium,

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