Dividend Changes and Stock Price Informativeness

49 Pages Posted: 20 Nov 2017

See all articles by Amedeo De Cesari

Amedeo De Cesari

University of Manchester - Alliance Manchester Business School - Finance & Accounting Group

Winifred Huang

University of Bath

Date Written: August 20, 2015

Abstract

We investigate how private information in stock prices impacts quarterly dividend changes. We find that the positive relationship between past returns and current dividend changes strengthens when returns convey more private information. This finding is robust to the use of several price informativeness measures and the inclusion of managerial private information and stock overvaluation measures. Managers seem to learn new information from stock prices that they use when deciding on their dividend policy. This study highlights private information in stock prices as an important determinant of dividend policy and contributes to the literature on the real effects of financial markets.

Keywords: Dividend changes, Stock price informativeness, Stock returns

JEL Classification: G35 G14

Suggested Citation

De Cesari, Amedeo and Huang, Winifred, Dividend Changes and Stock Price Informativeness (August 20, 2015). Journal of Corporate Finance, Vol. 35, 2015. Available at SSRN: https://ssrn.com/abstract=3072984

Amedeo De Cesari (Contact Author)

University of Manchester - Alliance Manchester Business School - Finance & Accounting Group ( email )

Crawford House
Booth Street East
Manchester, M15 6PB
United Kingdom
+44 (0) 161 2754298 (Phone)

Winifred Huang

University of Bath ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

HOME PAGE: http://researchportal.bath.ac.uk/en/persons/winifred-huang

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