Dividend Initiations and Long-Run IPO Performance

Posted: 5 Feb 2012

See all articles by Janice C. Y. How

Janice C. Y. How

Queensland University of Technology; Financial Research Network (FIRN)

Kian Ngo

FKP

Peter Verhoeven

Queensland University of Technology - QUT Business School; Financial Research Network (FIRN)

Multiple version iconThere are 2 versions of this paper

Date Written: August 25, 2011

Abstract

Dividend initiations are an economically significant event that has important implications for a firm’s future financial capacity. Given the market’s expectation of a consistent payout, managers of IPO firms must approach the initial dividend decision cautiously. We compare the long-run performance of IPO firms that initiated a dividend with that of similarly matched non-payers, and find robust results that firms which initiated a dividend perform significantly better up to five years after the initiation date. Further tests show that the post-initiation firm performance is explained mostly by dividend theory of signalling rather than free cash flow.

Keywords: dividend initiation, free cash flows, IPOs, long-run performance, signaling

Suggested Citation

How, Janice C. Y. and Ngo, Kian and Verhoeven, Peter, Dividend Initiations and Long-Run IPO Performance (August 25, 2011). Australian Journal of Management, Vol. 36, No. 2, 2011, Available at SSRN: https://ssrn.com/abstract=1998714

Janice C. Y. How (Contact Author)

Queensland University of Technology ( email )

2 George Street
Brisbane, Queensland 4000
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Kian Ngo

FKP ( email )

Level 5, 120 Edward Street
Brisbane, QLD4000
Australia

Peter Verhoeven

Queensland University of Technology - QUT Business School ( email )

GPO Box 2434
Brisbane, Queensland 4001
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
486
PlumX Metrics