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
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: Suggested Citation