Separating the Stock Market's Reaction to Simultaneous Dividend and Earnings Announcements

Sponholtz, Carina

doi:10.2139/ssrn.850070

Abstract

References (42)

Download This Paper | Share | Email |Add to Briefcase | Purchase Bound Hard Copy

Separating the Stock Market's Reaction to Simultaneous Dividend and Earnings Announcements

Carina Sponholtz

University of Aarhus - School of Economics and Management

November 17, 2005

EFA 2006 Zurich Meetings

Abstract:
We analyze simultaneous announcements of current dividends, current earnings and management forecasts of next year's earnings. By conducting the empirical analysis using Danish data, this study is the first not to suffer from problems related to low levels of agency costs and informational asymmetries between shareholders and management. We find that the stock market reacts to the surprise in management forecasts of next year's earnings and the current dividend. Additional breakdowns reveal that the signalling models and free cash flow hypothesis provide explanations for separate components of the market reaction. Thus, our results do not support the dividend irrelevancy proposition.

Number of Pages in PDF File: 42

Keywords: Dividends, Earnings, Management Forecasts, Event Study, Agency Theory, Signalling, Simultaneous Announcements

JEL Classification: G14, G30, G35, M41

working papers series

Download This Paper

Date posted: November 18, 2005

Suggested Citation

Sponholtz, Carina, Separating the Stock Market's Reaction to Simultaneous Dividend and Earnings Announcements (November 17, 2005). EFA 2006 Zurich Meetings. Available at SSRN: http://ssrn.com/abstract=850070 or http://dx.doi.org/10.2139/ssrn.850070

Contact Information

Carina Sponholtz (Contact Author)

University of Aarhus - School of Economics and Management ( email )

Bygn. 322, Universitetsparken
DK-8000 Aarhus C
Denmark