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http://ssrn.com/abstract=1072804
 
 

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Stale and Scale Effects in Markets-Based Accounting Research: Evidence from the Valuation of Dividends


Igor Goncharov


Lancaster University - Management School

David Veenman


Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)


European Accounting Review, Vol 23, No. 1, pp. 23-55, 2014

Abstract:     
This study revisits prior research on the valuation of dividends in an accounting-based valuation framework. Using a battery of tests, we show that market value deflation is essential in market-based tests of dividend displacement and signaling because it controls for ‘stale’ information in addition to scale (size) differences across firms. For U.S. firms, we show that after controlling for ‘stale’ information, the empirical association between dividends and market values switches from positive to negative. This switch is not explained by scale differences across firms. Further, we show that after controlling for staleness, the valuation of dividends remains positive for European firms. This result is explained by the relatively stronger association of dividends with future earnings in these settings (i.e., signaling). Lastly, our country-specific estimates of dividend valuation provide a potentially valuable index for studies aimed at examining the effects of accounting and securities regulation on information asymmetries in an international context.

Number of Pages in PDF File: 63

Keywords: Scale Effect, Valuation, Dividends, Signaling

JEL Classification: M41, C10, G12, G14

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Date posted: March 9, 2012 ; Last revised: September 4, 2014

Suggested Citation

Goncharov, Igor and Veenman, David, Stale and Scale Effects in Markets-Based Accounting Research: Evidence from the Valuation of Dividends. European Accounting Review, Vol 23, No. 1, pp. 23-55, 2014. Available at SSRN: http://ssrn.com/abstract=1072804 or http://dx.doi.org/10.2139/ssrn.1072804

Contact Information

Igor Goncharov (Contact Author)
Lancaster University - Management School ( email )
Bailrigg
Lancaster, LA1 4YX
United Kingdom
HOME PAGE: http://www.lancaster.ac.uk/lums/people/all/igor-goncharov/
David Veenman
Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )
P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands
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