Journal Article Deposit Demand and the Pricing of Demand Deposits: Reply Get access Bruce C. Cohen Bruce C. Cohen Northeastern University Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 86, Issue 1, February 1972, Pages 140–142, https://doi.org/10.2307/1880500 Published: 01 February 1972

The dividend decision is a residual corporate decision and yet it is not a residual corporate decision. This theme runs through Professor Higgins' paper. It is based on the one hand on Higgins' belief that other decisions are more important and should take precedence over the dividend decision, and on the other, that the dividend decision is a function of these more important decisions. If dividends were truly residual, they would be explained by the corporate budget identity. In the empirical analysis, however, dividends are a function of other balance sheet decisions. In this sense the decision is neither active nor residual but passive. The reader wonders why the author insists on this role for dividends when interdependency in decision making is the more appealing (and inevitable) framework.