New Perspectives on the Information Content of Dividend Initiation Announcements: The Special Case of Information Technology Firms

26 Pages Posted: 11 May 2015

See all articles by Susana Yu

Susana Yu

Iona College

Gwendolyn P. Webb

City University of New York (CUNY) - Baruch College - Zicklin School of Business

Date Written: Jan 15, 2014

Abstract

This paper examines dividend initiation announcements made by firms in the information technology sector. This sector is the subject of intense investor interest and has long been characterized with hyper growth, high margin, high volatility, and high risk. Also, the corporate life cycle of these firms is different than firms in older, more traditional industries. On the basis of a modern classification of the information technology industry, we examine a wide range of corporate performance and management measures to discriminate between the two theories of the information revealed by the announcement of dividend initiations, the signaling and life cycle theories. Our empirical results are more consistent with the corporate life cycle theory of dividends than with the information signaling hypothesis. This finding helps clarify the nature of the information revealed by the announcement. Moreover, it has clear implications for investors who are interested in the growth prospects of technology firms, or for others interested in their prospective stability and degree of maturity.

Keywords: Dividend Initiation, Dividend Announcements, Dividend Signaling, Corporate Life Cycle

JEL Classification: G14, G18

Suggested Citation

Yu, Susana and Webb, Gwendolyn P., New Perspectives on the Information Content of Dividend Initiation Announcements: The Special Case of Information Technology Firms (Jan 15, 2014). Available at SSRN: https://ssrn.com/abstract=2604743 or http://dx.doi.org/10.2139/ssrn.2604743

Susana Yu

Iona College ( email )

715 North Avenue
New Rochelle, NY 10801
United States

Gwendolyn P. Webb (Contact Author)

City University of New York (CUNY) - Baruch College - Zicklin School of Business ( email )

Department of Economics & Finance
P.O. Box B13-289 1 Bernard Baruch Way
New York, NY 10010
United States
646-312-3485 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
42
Abstract Views
381
PlumX Metrics