Dividend Initiations and Earnings Surprises

Financial Management, Vol. 27, No. 3, Autumn 1998, Special Issue: Dividends

Posted: 3 Feb 1999

See all articles by Marc L. Lipson

Marc L. Lipson

University of Virginia - Darden School of Business

Carlos P. Maquieira

University of Chile - Diagonal Paraguay

William L. Megginson

University of Oklahoma

Abstract

This paper examines the performance of newly public firms and compares those firms that initiated dividends with those that did not. Earnings increases following the dividend initiation and earnings surprises for initiating firms are more favorable than those for noninitiating firms. Furthermore, had noninitiating firms declared dividends that matched the dividend yield, dividend-to-sales ratio, or dividend-to-assets ratio of initiating firms, the promised dividend would have equaled about 8.5% of earnings, significantly above the 5% level for initiating firms. In contrast to DeAngelo, DeAngelo, and Skinner (1996), these results suggest that dividends signal differences in performance between otherwise comparable fims.

JEL Classification: G12, G14, G35

Suggested Citation

Lipson, Marc Lars and Maquieira V., Carlos Patricio and Megginson, William L., Dividend Initiations and Earnings Surprises. Financial Management, Vol. 27, No. 3, Autumn 1998, Special Issue: Dividends. Available at SSRN: https://ssrn.com/abstract=143682

Marc Lars Lipson (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4837 (Phone)
434-243-5021 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/lipson.htm

Carlos Patricio Maquieira V.

University of Chile - Diagonal Paraguay

257 OF 1206
Santiago
Chile

William L. Megginson

University of Oklahoma ( email )

307 W Brooks, 205A Adams Hall
Norman, OK 73019
United States
(405) 325-2058 (Phone)
(405) 325-1957 (Fax)

HOME PAGE: http://faculty-staff.ou.edu/M/William.L.Megginson-

Register to save articles to
your library

Register

Paper statistics

Abstract Views
1,389
PlumX Metrics