The Relative Importance of Competition and Contagion in Intra-Industry Information Transfers: An Investigation of Dividend Announcements

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

Posted: 4 Feb 1999

See all articles by Paul A. Laux

Paul A. Laux

University of Delaware - Alfred Lerner College of Business and Economics

Laura T. Starks

University of Texas at Austin - Department of Finance

Pyung Sig Yoon

University of Texas at Austin - Department of Finance; Chungnam National University

Abstract

Large revisions in dividends are accompanied by stock price reactions for industry rivals of the announcing firm. Though these effects are near-zero on average, their magnitude differs systematically across the firms in the industry. Rivals that are unlikely to be affected by competitive realignments within the industry tend to experience stock price effects like those of the announcing firm. Those that are likely to be affected tend to experience statistically insignificant reactions of the opposite sign. Thus, for some rivals, competitive effects apparently offset contagion effects. We find supporting results for changes in rival's dividends over a longer period.

JEL Classification: G12, G14, G35

Suggested Citation

Laux, Paul A. and Starks, Laura T. and Yoon, Pyung Sig, The Relative Importance of Competition and Contagion in Intra-Industry Information Transfers: An Investigation of Dividend Announcements. Financial Management, Vol. 27, No. 3, Autumn 1998, Special Issue: Dividends, Available at SSRN: https://ssrn.com/abstract=143712

Paul A. Laux (Contact Author)

University of Delaware - Alfred Lerner College of Business and Economics ( email )

Office 306 Purnell Hall
Newark, DE 19716
United States
302-831-6598 (Phone)
302-831-3061 (Fax)

Laura T. Starks

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-471-5899 (Phone)
512-471-5073 (Fax)

Pyung Sig Yoon

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States

Chungnam National University ( email )

Daejon, 34134
Korea, Republic of (South Korea)

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