The Information Content of Dividend and Capital Structure Policies

Financial Management, Vol. 28, Iss. 4, Winter 1999

Posted: 14 Aug 2001

See all articles by Paul D. Koch

Paul D. Koch

Iowa State University - Finance Department; Iowa State University - Finance Department

Catherine Shenoy

University of Kansas, School of Business

Abstract

We reexamine signaling and agency theories and argue that the free-cash-flow hypothesis implies a stronger information effect for both over- and under-investing firms than for value-maximizing firms. Our results indicate that dividend and capital structure policies interact to provide significant predictive information about future cash flow. We also find a U-shaped relation between the amount of information and Tobin's q. The minimum of this relation occurs near a q value of one. This outcome implies a stronger information effect for both over- and under-investing firms than for value-maximizing firms.

Suggested Citation

Koch, Paul D. and Shenoy, Catherine, The Information Content of Dividend and Capital Structure Policies. Financial Management, Vol. 28, Iss. 4, Winter 1999, Available at SSRN: https://ssrn.com/abstract=267707

Paul D. Koch (Contact Author)

Iowa State University - Finance Department

Ivy College of Business
Ames, IA 50011
United States
5152942491 (Phone)

HOME PAGE: http://https://www.business.iastate.edu/directory/pkoch/

Iowa State University - Finance Department

Ames, IA 50011-2063
United States
5152942491 (Phone)

Catherine Shenoy

University of Kansas, School of Business ( email )

1300 Sunnyside Avenue
Lawrence, KS 66045
United States
785-864-7519 (Phone)

HOME PAGE: http://cshenoy.business.ku.edu/

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