The Impact of Dividend Reduction on Shareholders Wealth - Evidence from Australia
La Trobe University - Department of Finance; Financial Research Network (FIRN)
Monash University - Department of Accounting and Finance
20th Australasian Finance & Banking Conference 2007 Paper
This study examines the stock price reactions to interim and final dividend reductions in Australia. We find that the market reacts more negatively to interim dividend reductions than final dividend reductions consistent with the view that market participants anticipate deterioration in profitability of firms that eventually announce interim dividend reductions. We find that size of the dividend reduction depends on the riskiness of the firm (idiosyncratic risk), size of the firm prior year profitability and changes in the profitability. We also find that reduce dividend at the interim level rather than delay to final stage depends on the prior year profitability and size of the firm.
Number of Pages in PDF File: 19
Keywords: price reaction, Australia, dividend cuts, omissions, interim and final
JEL Classification: G14, G35
Date posted: August 24, 2007 ; Last revised: February 5, 2014
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