Dividend Omissions and Intraindustry Information Transfers
Posted: 11 Dec 2001
We examine potential information transfers from companies that announce dividend omissions to their industry rivals. Specifically, we examine the abnormal stock returns and abnormal earnings forecast revisions of rivals after a company makes a dividend omission announcement. Our results show negative and significant abnormal stock returns and negative and significant abnormal forecast revisions for rival companies in response to the announcement, and a significant positive relation between the two. We conclude that a dividend omission announcement transmits unfavorable information across the announcing company's industry that affects cash flow expectations and ultimately stock prices.
JEL Classification: G35
Suggested Citation: Suggested Citation