The Influence of Company Financial Performance on the Interpretation of Dividend and Earnings Signals: A Study of Accounting- and Market-Based Data

BRITISH ACCOUNTING REVIEW, Vol 28, No 1, March 1996

Posted: 27 Nov 1996

See all articles by G. Abeyratna

G. Abeyratna

University of Sri Jayawardenapura at Sri Lanka

A. A. Lonie

University of Dundee

D.M. Power

University of Dundee

C. D. Sinclair

University of Dundee

Abstract

Numerous studies conducted in different countries have documented evidence that the announcements of changes in dividends and earnings convey specific information to the capital market. However, recent studies which have examined simultaneous announcements by firms have discovered that the signals of dividends and earnings may interact with one another; one announcement may either corroborate or contradict the other and, in consequence, influence the level of any abnormal share returns which are earned by investors (see Kane, Lee & Marcus, 1984; Easton, 1991; Eddy & Seifert, 1992). This problem is of special relevance to the UK where the announcement of dividends and earnings news on the same day is common practice. This simultaneous release of a variety of different combinations of dividend and earnings signals may make it more difficult for investors to decode complex messages contained in mixed signals and also make it harder for them to decipher relevance information conveyed by the individual components of combined signals.

JEL Classification: M41, G14, G35

Suggested Citation

Abeyratna, G. and Lonie, A. A. and Power, David M. and Sinclair, C. Donald, The Influence of Company Financial Performance on the Interpretation of Dividend and Earnings Signals: A Study of Accounting- and Market-Based Data. BRITISH ACCOUNTING REVIEW, Vol 28, No 1, March 1996. Available at SSRN: https://ssrn.com/abstract=2819

G. Abeyratna

University of Sri Jayawardenapura at Sri Lanka

Sri Lanka
Sri Lanka

A. A. Lonie

University of Dundee ( email )

Dundee, Scotland DD1 4HN
United Kingdom

David M. Power (Contact Author)

University of Dundee ( email )

Dundee, Scotland DD1 4HN
United Kingdom
(+44) 1382 344 854 (Phone)
(+44) 1382 224 419 (Fax)

C. Donald Sinclair

University of Dundee ( email )

Dundee, Scotland DD1 4HN
United Kingdom

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