On the Timing of Dividend Initiations

Financial Management, Vol. 36, No. 4, pp. 31-65, Winter 2007

50 Pages Posted: 8 Feb 2007 Last revised: 20 Nov 2009

See all articles by Laarni T. Bulan

Laarni T. Bulan

Cornerstone Research

Narayanan Subramanian

Cornerstone Research - Boston Office

Lloyd Tanlu

Washington and Lee University; University of Washington - Department of Accounting; Northeastern University

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Abstract

We study the timing and significance of dividend initiations in the life cycle of a firm. Following a sample of firms from the IPO onwards, and using a hazard model to examine which factors predict initiations, we find that: (i) initiators are large firms with relatively high profitability and cash balances, and low growth rates; and (ii) systematic risk does not change significantly around initiations, in contrast to previous studies on dividend changes. These results are contrary to the signaling theories of dividend policy. Finally, we find mixed evidence that a firm's propensity to initiate dividends is affected by the market sentiment for dividends.

Keywords: Dividend Initiations, Maturity Hypothesis, Dividend Premium

JEL Classification: G35

Suggested Citation

Bulan, Laarni Tobia and Subramanian, Narayanan and Tanlu, Lloyd D., On the Timing of Dividend Initiations. Financial Management, Vol. 36, No. 4, pp. 31-65, Winter 2007, Available at SSRN: https://ssrn.com/abstract=962109

Laarni Tobia Bulan (Contact Author)

Cornerstone Research ( email )

Boston, MA
United States

Narayanan Subramanian

Cornerstone Research - Boston Office ( email )

699 Boylston Street
Boston, MA 02115
United States
(617) 927-3000 (Phone)
(617) 927-3100 (Fax)

HOME PAGE: http://www.cornerstone.com/

Lloyd D. Tanlu

Washington and Lee University ( email )

Lexington, VA 24450
United States

University of Washington - Department of Accounting ( email )

224 Mackenzie Hall, Box 353200
Seattle, WA 98195-3200
United States

Northeastern University ( email )

360 Huntington Ave.
Boston, MA 02115
United States

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