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Earnings and Dividend Announcements: Is There a Corroboration Effect?


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  • Kane, Alex
  • Lee, Young Ki
  • Marcus, Alan


We examine abnormal stock returns surrounding contemporaneous earnings and dividend announcements in order to determine whether investors evaluate the two announcements in relation to each other.We find that there is a statistically significant interaction effect.The abnormal return corresponding to any earnings or dividend announcement depends upon the value of the other announcement. This evidence suggests the existence of a corroborative relationship between the two announcements. Investors give more credence to unanticipated dividend increases or decreases when earnings are also above or below expectations, and vice versa.

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Bibliographic Info

Article provided by American Finance Association in its journal Journal of Finance.

Volume (Year): 39 (1984)
Issue (Month): 4 (September)
Pages: 1091-99

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Handle: RePEc:bla:jfinan:v:39:y:1984:i:4:p:1091-99

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  1. Watts, Ross L, 1976. "Comments on "On the Informational Content of Dividends."," The Journal of Business, University of Chicago Press, vol. 49(1), pages 81-85, January.
  2. Kaplan, Robert S & Roll, Richard, 1972. "Investor Evaluation of Accounting Information: Some Empirical Evidence," The Journal of Business, University of Chicago Press, vol. 45(2), pages 225-57, April.
  3. Watts, Ross L, 1976. "Comments on "The Impact of Dividend and Earnings Announcements: A Reconciliation."," The Journal of Business, University of Chicago Press, vol. 49(1), pages 97-106, January.
  4. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, Econometric Society, vol. 48(4), pages 817-38, May.
  5. Brown, Stewart L, 1978. "Earnings Changes, Stock Prices, and Market Efficiency," Journal of Finance, American Finance Association, American Finance Association, vol. 33(1), pages 17-28, March.
  6. Miller, Merton H & Scholes, Myron S, 1982. "Dividends and Taxes: Some Empirical Evidence," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 90(6), pages 1118-41, December.
  7. Pettit, R Richardson, 1976. "The Impact of Dividend and Earnings Announcements: A Reconciliation," The Journal of Business, University of Chicago Press, vol. 49(1), pages 86-96, January.
  8. Pettit, R Richardson, 1972. "Dividend Announcements, Security Performance, and Capital Market Efficiency," Journal of Finance, American Finance Association, American Finance Association, vol. 27(5), pages 993-1007, December.
  9. Divecha, Arjun & Morse, Dale, 1983. "Market Responses to Dividend Increases and Changes in Payout Ratios," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 18(02), pages 163-173, June.
  10. Watts, Ross, 1973. "The Information Content of Dividends," The Journal of Business, University of Chicago Press, vol. 46(2), pages 191-211, April.
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Cited by:
  1. Thomas McCluskey & Aoife Broderick & Amanda Boyle & Bruce Burton & David Power, 2010. "Evidence on Irish financial analysts' and fund managers' views about dividends," Qualitative Research in Financial Markets, Emerald Group Publishing, Emerald Group Publishing, vol. 2(2), pages 80-99, October.
  2. Azhagaiah Ramachandran & Veeramuthu Packkirisamy, 2010. "The Impact of Firm Size on Dividend Behaviour: A Study With Reference to Corporate Firms across Industries in India," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 8(1), pages 049-078.
  3. Jyrki Niskanen & Juha Kinnunen & Eero Kasanen, 1998. "A note on the information content of parent company versus consolidated earnings in Finland," European Accounting Review, Taylor & Francis Journals, Taylor & Francis Journals, vol. 7(1), pages 31-40.
  4. Correia da Silva, L. & Goergen, M. & Renneboog, L.D.R., 2002. "When do German Firms Change their Dividends?," Discussion Paper, Tilburg University, Center for Economic Research 2002-056, Tilburg University, Center for Economic Research.
  5. Cheng, Louis T.W. & Davidson III, Wallace N. & Leung, T.Y., 2011. "Insider trading returns and dividend signals," International Review of Economics & Finance, Elsevier, vol. 20(3), pages 421-429, June.
  6. Louis Cheng & Hung-Gay Fung & Tak Leung, 2007. "Information effects of dividends: Evidence from the Hong Kong market," Review of Quantitative Finance and Accounting, Springer, vol. 28(1), pages 23-54, January.
  7. Sabur Mollah, 2011. "Do emerging market firms follow different dividend policies?: Empirical investigation on the pre- and post-reform dividend policy and behaviour of Dhaka Stock Exchange listed firms," Studies in Economics and Finance, Emerald Group Publishing, Emerald Group Publishing, vol. 28(2), pages 118-135, June.
  8. Hiroyuki Ishikawa, 2011. "Empirical Analysis on the Dividend Life-Cycle Theory: Evidence from Japan," The Japanese Accounting Review, Research Institute for Economics & Business Administration, Kobe University, vol. 1, pages 39-60, December.
  9. Mohammad G. Robbani & Rafiqul Bhuyan, 2010. "Re-stating financial statements and its reaction in financial market: Evidence from Canadian stock market," International Journal of Accounting and Information Management, Emerald Group Publishing, Emerald Group Publishing, vol. 18(3), pages 188-197, September.
  10. Bernheim, B Douglas & Wantz, Adam, 1995. "A Tax-Based Test of the Dividend Signaling Hypothesis," American Economic Review, American Economic Association, vol. 85(3), pages 532-51, June.
  11. Frankfurter, George M. & Wood, Bob Jr., 2002. "Dividend policy theories and their empirical tests," International Review of Financial Analysis, Elsevier, vol. 11(2), pages 111-138.
  12. Kasanen, Eero & Kinnunen, Juha & Niskanen, Jyrki, 1996. "Dividend-based earnings management: Empirical evidence from Finland," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 22(1-3), pages 283-312, October.
  13. How, Janice C.Y. & Verhoeven, Peter & Huang, Caro X., 2005. "Information asymmetry surrounding earnings and dividend announcements: An intra-day analysis," Mathematics and Computers in Simulation (MATCOM), Elsevier, Elsevier, vol. 68(5), pages 463-473.
  14. Thomas McCluskey & Bruce Burton & David Power, 2007. "Evidence on Irish financial directors' views about dividends," Qualitative Research in Accounting & Management, Emerald Group Publishing, Emerald Group Publishing, vol. 4(2), pages 115-132, July.
  15. Warwick Anderson, 2013. "The Role of mid-year dividends as predictors of yearly earnings," Working Papers in Economics 13/01, University of Canterbury, Department of Economics and Finance.


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