Dividend Announcements Reconsidered: Dividend Changes Versus Dividend Surprises

37 Pages Posted: 5 Nov 2012

See all articles by Christian Andres

Christian Andres

WHU - Otto Beisheim School of Management

André Betzer

BUW- Schumpeter School of Business and Economics

Inga van den Bongard

University of Mannheim - Finance Area

Christian Haesner

WHU - Otto Beisheim School of Management

Erik Theissen

University of Mannheim - Finance Area

Multiple version iconThere are 2 versions of this paper

Date Written: June 6, 2012

Abstract

This paper reconsiders the issue of share price reactions to dividend announcements. Previous papers rely almost exclusively on a naive dividend model in which the dividend change is used as a proxy for the dividend surprise. We use the difference between the actual dividend and the analyst consensus forecast as obtained from I/B/E/S as a proxy for the dividend surprise. Using data from Germany, we find significant share price reactions after dividend announcements. Once we control for analysts’ expectations, the dividend change loses explanatory power. Our results thus suggest that the naive model should be abandoned. We use panel methods to analyze the determinants of the share price reactions. We find (weak) support in favor of the dividend signaling hypothesis and no support for either the free cash flow hypothesis or the rent extraction hypothesis.

Keywords: Dividend Announcements, Market Efficiency, Ownership Structure, Agency Theory

JEL Classification: G35, G34

Suggested Citation

Andres, Christian and Betzer, André and van den Bongard, Inga and Haesner, Christian and Theissen, Erik, Dividend Announcements Reconsidered: Dividend Changes Versus Dividend Surprises (June 6, 2012). 29th International Conference of the French Finance Association (AFFI) 2012. Available at SSRN: https://ssrn.com/abstract=2084886 or http://dx.doi.org/10.2139/ssrn.2084886

Christian Andres

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

André Betzer

BUW- Schumpeter School of Business and Economics ( email )

Gaußstraße 20
Wuppertal
Germany

HOME PAGE: http://finance.uni-wuppertal.de/index.php?id=1153

Inga Van den Bongard

University of Mannheim - Finance Area ( email )

Mannheim, 68131
Germany

Christian Haesner

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

Erik Theissen (Contact Author)

University of Mannheim - Finance Area ( email )

Mannheim, 68131
Germany

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