New Evidence On The Information Content of Dividend Announcements
University of Illinois at Chicago - Institute of Government and Public Affairs; National Bureau of Economic Research (NBER)
Quarterly Review of Economics and Finance, Vol 38 No 2, Summer 1998
This study presents new evidence on the relationship between dividend announcements and stock price responses, and provides a more comprehensive empirical analysis than that previously found in the literature. We simultaneously test several competing theories regarding the information content of dividends using two types of announcements: dividend initiations and specially designated dividends. The results of our analyses provide strong support for the single signal, cash-flow signalling hypothesis and only weak support for the John and Lang (1991) multiple signal, cash-flow signalling model. Supporting evidence is also presented for the predictions of the free-cash flow hypothesis.
JEL Classification: G12, G14Accepted Paper Series
Date posted: April 8, 1998
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