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Corporate Financial Policy, Information, and Market Expectations: An Empirical Investigation of Dividends

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Author Info
 Ofer, Aharon R
Siegel, Daniel R
Abstract

This paper documents a relationship between announcements of unexpected changes in financial policy and unexpec ted changes in performance of the firm. Using a new methodology that combines analysis of stock price movements and earnings forecast data the authors provide evidence that analysts revise their earnings fo recasts rationally following the announcement of an unexpected divide nd change by an amount positively related to the size of both the une xpected dividend change and the change in equity value surrounding th e announcement. The results provide direct evidence consistent with t he hypothesis that unexpected dividend changes signal information abo ut firm performance to market participants. Copyright 1987 by American Finance Association.

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

Volume (Year): 42 (1987)
Issue (Month): 4 (September)
Pages: 889-911
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Handle: RePEc:bla:jfinan:v:42:y:1987:i:4:p:889-911

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  1. Correia da Silva, L. & Goergen, M. & Renneboog, L.D.R., 2002. "When do German firms change their dividends?," Discussion Paper 56, Tilburg University, Center for Economic Research. [Downloadable!]
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  2. B. Douglas Bernheim & Adam Wantz, 1992. "A Tax-Based Test of the Dividend Signaling Hypothesis," NBER Working Papers 4244, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Lawrence Peter King, 1999. "The Developmental Consequences of Foreign Direct Investment in the Transition from Socialism to Capitalism: The Performance of Foreign Owned Firms in Hungary," William Davidson Institute Working Papers Series 277, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  4. Christine Jolls, 1998. "Stock Repurchases and Incentive Compensation," NBER Working Papers 6467, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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