Institutional Trading Before Dividend Reduction Announcements

46 Pages Posted: 4 May 2017 Last revised: 12 May 2017

See all articles by Darren Henry

Darren Henry

La Trobe University - Department of Economics and Finance; Financial Research Network (FIRN)

Lily Nguyen

The University of Queensland - UQ Business School

Viet Hung Pham

La Trobe University - La Trobe Business School - Department of Economics and Finance

Date Written: May 3, 2017

Abstract

Using a large proprietary database of transaction-level institutional trades for the period from 1997-2011, we find that institutional investors are net sellers in dividend reduction firms during the two quarters prior to the announcements. They also trade more intensively in firms that do not prepare the market for dividend cuts or that have greater information asymmetry. Trading by both pension plan sponsors and money managers affects the market reaction to the announcements. Finally, all institutional investors earn positive profits by trading in the two quarters prior to the announcements, and money managers outperform pension plan sponsors.

Keywords: Dividend reduction announcements; Institutional trading

JEL Classification: G14, G29, G35

Suggested Citation

Henry, Darren and Nguyen, Lily and Pham, Viet Hung, Institutional Trading Before Dividend Reduction Announcements (May 3, 2017). Journal of Financial Markets, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2962796 or http://dx.doi.org/10.2139/ssrn.2962796

Darren Henry

La Trobe University - Department of Economics and Finance ( email )

Department of Economics and Finance
La Trobe Business School
Bundoora 3086 Victoria
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Lily Nguyen (Contact Author)

The University of Queensland - UQ Business School ( email )

St Lucia
Brisbane, Queensland 4072
Australia

Viet Hung Pham

La Trobe University - La Trobe Business School - Department of Economics and Finance ( email )

Bundoora
Melbourne, 3086
Australia

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