Dividend Reductions, The Timing of Dividend Payments and Information Content
La Trobe University - Department of Finance; Financial Research Network (FIRN)
University of Southern Queensland
University of Birmingham - Department of Accounting and Finance
Monash University - Department of Accounting and Finance
August 5, 2012
Journal of Corporate Finance, DOI 10.1016/j.jcorpfin.2012.08.002, Forthcoming
Finance and Corporate Governance Conference 2010
20th Australasian Finance & Banking Conference 2007 Paper
Australian companies pay dividends semi-annually with smaller “interim” payments and larger “final” payments. Interim dividends are declared and paid within a less full information environment than final dividends. We analyze the interactions between the timing of dividends and their information content, controlling for share repurchase and tax effects. Dividend reductions that are not associated with share repurchases are statistically significantly related to future abnormal earnings and provide strong support for the information content of dividend reductions. The percentage of dividend reduction is stronger for interim than for final dividend reductions. The market reaction is negatively related to the reduction in imputation tax credit and reacts more aggressively and negatively to interim as compared to final dividend reductions.
Number of Pages in PDF File: 40
Keywords: Price reactions, Australia, Dividend Reductions, Information Content, Franked and Unfranked, Interim and Final
JEL Classification: G14, G35Accepted Paper Series
Date posted: February 22, 2012 ; Last revised: April 22, 2013
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