Does managerial reluctance of dividend cuts signal future earnings?

In this study, we develop alternative dividend stickiness measures as a proxy for managerial reluctance to cut dividends and investigate the information content of dividend stickiness. We find that firms with stickier dividend payout have greater earnings persistence, earnings growth, and pricing multiples on earnings. Further analysis shows that the signaling effect of dividend stickiness on future earnings is more pronounced for firms with less catering incentives to avoid dividend cuts. Our results suggest that dividend stickiness has incremental explanation over dividend payout for signaling future earnings.