Abstract

http://ssrn.com/abstract=5379
 
 

Citations



 


 



Reversal of Fortune: Dividend Policy and the Disappearance of Sustained Earnings Growth


Harry DeAngelo


University of Southern California - Marshall School of Business - Finance and Business Economics Department

Linda DeAngelo


University of Southern California - Marshall School of Business - Finance and Business Economics Department

Douglas J. Skinner


The University of Chicago - Booth School of Business



Abstract:     
Managers of more than two-thirds of 145 NYSE firms responded to stalled earnings growth by increasing dividends, with most increases at least as large as the dividend increase in the peak earnings year. These dividend increases are difficult to reconcile with signalling models since (i) most firms' prior sustained earnings growth evaporated, and (ii) there is essentially no relation between favorable dividend signals and future earnings. The stock market recognized the reduced growth earnings, with average abnormal returns of - 17.65 percent in the year of the initial earnings decline and -41.40 percent cumulated over that and the next three years. We find some evidence that sample firms' dividend policies reflect behavioral biases that lead managers to send overly optimistic signals.

JEL Classification: G35

working papers series





Not Available For Download

Date posted: September 14, 1999  

Suggested Citation

DeAngelo, Harry and DeAngelo, Linda and Skinner, Douglas J., Reversal of Fortune: Dividend Policy and the Disappearance of Sustained Earnings Growth. Available at SSRN: http://ssrn.com/abstract=5379

Contact Information

Harry DeAngelo (Contact Author)
University of Southern California - Marshall School of Business - Finance and Business Economics Department ( email )
Marshall School of Business
Los Angeles, CA 90089
United States
213-740-6541 (Phone)
213-740-6650 (Fax)
Linda DeAngelo
University of Southern California - Marshall School of Business - Finance and Business Economics Department ( email )
Marshall School of Business
Los Angeles, CA 90089
United States
213-740-3868 (Phone)
213-740-6650 (Fax)
Douglas J. Skinner
The University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7137 (Phone)

Chicago Booth School of Business Logo

Feedback to SSRN


Paper statistics
Abstract Views: 2,372

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo6 in 0.282 seconds