The Information Content of Dividend and Capital Structure Policies
Financial Management, Vol. 28, Iss. 4, Winter 1999
Posted: 14 Aug 2001
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: 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
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