The Information Content of Dividend Initiations: Additional Evidence

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

Posted: 9 Feb 1999

See all articles by Edward Alexander Dyl

Edward Alexander Dyl

University of Arizona

Robert A. Weigand

Washburn University School of Business

Abstract

We hypothesize that the initiation of cash dividends indicates that a firm?s earnings and cash flows have become fundamentally less risky. We present evidence to support this hypothesis. A sample of firms initiating dividends displays a precipitous decrease in risk immediately following the dividend announcement. Although these firms? earnings do not subsequently increase, earnings volatility is significantly lower following the dividend decision. We also find that the decrease in risk is related to the excess return observed around the dividend announcement.

JEL Classification: G12, G14, G35

Suggested Citation

Dyl, Edward A. and Weigand, Robert A., The Information Content of Dividend Initiations: Additional Evidence. Financial Management, Vol. 27, No. 3, Autumn 1998, Special Issue: Dividends, Available at SSRN: https://ssrn.com/abstract=143710

Edward A. Dyl (Contact Author)

University of Arizona ( email )

Department of Finance
Tucson, AZ 85721
United States
520-621-9534 (Phone)
520-621-1261 (Fax)

Robert A. Weigand

Washburn University School of Business ( email )

Topeka, KS
United States

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