Firms with high dividends adjust slower, risking financial distress: study
The study looked at how companies adjust their debt levels over time. They found that firms with high dividend payments, big investments, high profits, lots of growth opportunities, or far from their target debt level adjust their debt slower. Companies tend to quickly move towards their target debt level when they have too much debt to avoid financial trouble. This supports the idea that companies carefully balance the benefits and costs of taking on debt.