The US Financial Crisis and Corporate Dividend Reactions: For Better or for Worse?

40 Pages Posted: 9 Jan 2018 Last revised: 31 Jan 2018

See all articles by Jitka Hilliard

Jitka Hilliard

Auburn University

John S. Jahera

Auburn University - Harbert College of Business

Haoran Zhang

Auburn University, Harbert College of Business, Department of Finance, Students

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Date Written: January 30, 2018

Abstract

We examine how changes in dividend policy in 2008 as the financial crisis was unfolding influenced firm risk-adjusted returns in the following years. Our sample consists of NYSE- and NASDAQ-traded firms that paid dividends in 2007. We divide these firms into four groups based on their dividend policy in 2008. We find that firms that decreased or eliminated dividends in 2008 had higher risk-adjusted returns in 2009. The higher risk-adjusted return is consistent with the better corporate governance in 2007. This finding suggests that the firms that quickly reacted to the deteriorating economic conditions by cutting dividends and preserving cash were able to better weather the coming financial crisis.

Keywords: Dividend Policy, Financial Crises, Corporate Decision Making

JEL Classification: G32, G35

Suggested Citation

Hilliard, Jitka and Jahera, John S. and Zhang, Haoran, The US Financial Crisis and Corporate Dividend Reactions: For Better or for Worse? (January 30, 2018). Available at SSRN: https://ssrn.com/abstract=3098233 or http://dx.doi.org/10.2139/ssrn.3098233

Jitka Hilliard

Auburn University ( email )

415 Magnolia Ave.
Auburn, AL 36849
United States
334-844-5520 (Phone)

John S. Jahera

Auburn University - Harbert College of Business ( email )

415 Magnolia Ave.
Auburn, AL 36849
United States
334-844-5344 (Phone)

Haoran Zhang (Contact Author)

Auburn University, Harbert College of Business, Department of Finance, Students ( email )

Auburn, AL 36849
United States

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