A Theory of Stock Price Responses to Alternative Corporate Cash Disbursement Methods: Stock Repurchases and Dividends
AbstractThis paper develops a model in which managers can signal their firms' true values by using either a dividend or a stock repurchase or both. The authors explain a number of stylized facts about these cash disbursement mechanisms, particularly those concerning the relative magnitudes of stock price responses to dividends and repurchases. Most importantly, they explain why a stock repurchase elicits a significantly higher price response, on average, than a dividend announcement. Copyright 1987 by American Finance Association.
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Bibliographic InfoArticle provided by American Finance Association in its journal Journal of Finance.
Volume (Year): 42 (1987)
Issue (Month): 2 (June)
Other versions of this item:
- Ahron R. Ofer & Anjan V. Thakor, 2004. "A Theory of Stock Price Responses to Alternative Corporate Cash Disbursement Methods: Stock Repurchase and Dividends," Finance 0411031, EconWPA.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Masulis, Ronald W, 1980. " Stock Repurchase by Tender Offer: An Analysis of the Causes of Common Stock Price Changes," Journal of Finance, American Finance Association, vol. 35(2), pages 305-19, May.
- Nils H. Hakansson., 1982. "To Pay or Not to Pay Dividends," Research Program in Finance Working Papers 124, University of California at Berkeley.
- Leland, Hayne E & Pyle, David H, 1977.
"Informational Asymmetries, Financial Structure, and Financial Intermediation,"
Journal of Finance,
American Finance Association, vol. 32(2), pages 371-87, May.
- Hayne E. Leland and David H. Pyle., 1976. "Informational Asymmetries, Financial Structure, and Financial Intermediation," Research Program in Finance Working Papers 41, University of California at Berkeley.
- Salman Shah & Anjan V. Thakor, 2004.
"Optimal Capital Structure and Project Financing,"
- Hakansson, Nils H, 1982. " To Pay or Not to Pay Dividend," Journal of Finance, American Finance Association, vol. 37(2), pages 415-28, May.
- Asquith, Paul & Mullins, David W, Jr, 1983. "The Impact of Initiating Dividend Payments on Shareholders' Wealth," The Journal of Business, University of Chicago Press, vol. 56(1), pages 77-96, January.
- Spence, Michael, 1974. "Competitive and optimal responses to signals: An analysis of efficiency and distribution," Journal of Economic Theory, Elsevier, vol. 7(3), pages 296-332, March.
- David Besanko & Anjan V. Thakor, 2004.
"Competitive Equilibrium in the Credit Market under Asymmetric Information,"
- Besanko, David & Thakor, Anjan V., 1987. "Competitive equilibrium in the credit market under asymmetric information," Journal of Economic Theory, Elsevier, vol. 42(1), pages 167-182, June.
- John G. Riley, 1976.
UCLA Economics Working Papers
071, UCLA Department of Economics.
- Miller, Merton H & Rock, Kevin, 1985. " Dividend Policy under Asymmetric Information," Journal of Finance, American Finance Association, vol. 40(4), pages 1031-51, September.
- Ambarish, Ramasastry & John, Kose & Williams, Joseph, 1987. " Efficient Signalling with Dividends and Investments," Journal of Finance, American Finance Association, vol. 42(2), pages 321-43, June.
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