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This study examines whether comprehensive income (CI) and other comprehensive income (OCI) influence dividends of Japanese companies. While CI is considered to be the new ˵bottom line″ of income statements of companies, the impact on dividends has not been examined empirically. Lintner (1956. The American Economic Review, 46, 97–113) and subsequent studies predict that only earnings that are more persistent and less volatile are related to dividends. Contrary to this prediction, our findings suggest that both CI and OCI have positive coefficients with dividend changes. Moreover, we further find that negative OCI is more likely to result in lower dividends. We propose several explanations for our findings. [ABSTRACT FROM AUTHOR]

This study analyzes the information contents of income smoothing behavior, especially the role of income smoothing behavior as a signal of future performance. What do smoothed earnings tell us about the future? To answer this research question, this paper focuses on earnings persistence and dividend policy based on two prior survey papers. These two issues (earnings persistence and dividend policy) are the foci of this study, based on Japanese managers' responses to questions regarding their motivation for income smoothing. This paper provides two new pieces of evidence. First, income smoothing in the previous period relates positively to future earnings persistence. Second, firms that engage in more smoothing tend to pay more stable dividends in the future, even when we control for past dividend policy, fundamental factors, and corporate governance factors. These results indicate that income smoothing behavior is likely to reflect future stability of earnings performance. Income smoothing acts as a vehicle through which managers can reveal private information about future earnings persistence and future dividend policy. The empirical evidence supports the information view rather than a garbling view of income smoothing, and sheds light on the bright side of smoothed earnings rather than its dark side. [ABSTRACT FROM AUTHOR]