The Dividend Initiation Decision of Newly Public Firms: Some Evidence on Signaling with Dividends

64 Pages Posted: 13 Jul 2006 Last revised: 30 Jan 2011

See all articles by Jayant R. Kale

Jayant R. Kale

Northeastern University

Omesh Kini

Georgia State University

Janet D. Payne

Texas State University, San Marcos - Department of Finance and Economics

Date Written: January 4, 2011

Abstract

We track the dividend initiation decisions of a sample of 6,588 firms that went public during the period 1979-2005 and find that 873 of them initiated dividends. Our primary objective is to determine whether information signaling can explain the dividend initiation (DI) decision. We find that variables suggested by the dividend-signaling models of John and Williams (1985) and Allen, Bernardo, and Welch (2000) are significant determinants of the DI decision and the associated announcement-period stock price effect. We also find support for the residual, agency, tax, clientele, transactions costs, catering, and life cycle explanations of dividend policy.

Keywords: Dividend Initiation, Dividend Level, Dividend Initiation Timing, Payout Policy

JEL Classification: G35, G32, G31

Suggested Citation

Kale, Jayant Raghunath and Kini, Omesh and Payne, Janet D., The Dividend Initiation Decision of Newly Public Firms: Some Evidence on Signaling with Dividends (January 4, 2011). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming, Available at SSRN: https://ssrn.com/abstract=913909

Jayant Raghunath Kale

Northeastern University ( email )

Boston, MA 02115
United States

Omesh Kini (Contact Author)

Georgia State University ( email )

University Plaza
Atlanta, GA 30303-3083
United States
404-651-2656 (Phone)

Janet D. Payne

Texas State University, San Marcos - Department of Finance and Economics ( email )

San Marcos, TX 78666
United States

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