The Impact of Institutional Interest on the Information Content of Dividend Changes

Posted: 30 Jun 1999

See all articles by Ramesh P. Rao

Ramesh P. Rao

Oklahoma State University - Stillwater - Spears School of Business - Department of Finance

Chenchu Bathala

Cleveland State University

Sadhana Alangar

Wayne State University

Abstract

We test the hypothesis that the information content of dividend change announcements, as reflected in stock prices, is directly related to the degree of pre-announcement information asymmetry in the stock. The dividend change announcements include initiations, large increases, large decreases, and omissions. Information asymmetry is proxied by the proportion of stock held by institutions. Consistent with the hypothesis, we document a significantly positive relation between the absolute values of the announcement-period excess returns and the degree of pre-announcement information asymmetry in the stock. This finding appears to hold for all types of dividend changes except dividend omissions.

JEL Classification: G14, G35

Suggested Citation

Rao, Ramesh P. and Bathala, Chenchu and Alangar, Sadhana, The Impact of Institutional Interest on the Information Content of Dividend Changes. Journal of Financial Research. Available at SSRN: https://ssrn.com/abstract=164357

Ramesh P. Rao (Contact Author)

Oklahoma State University - Stillwater - Spears School of Business - Department of Finance ( email )

Spears School of Business
Stillwater, OK 74078-4011
United States
405-744-1385 (Phone)
405-744-5180 (Fax)

Chenchu Bathala

Cleveland State University

Cleveland, OH 44115
United States

Sadhana Alangar

Wayne State University

Detroit, MI 48202
United States

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