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The Effect of Dividend Changes on Stock and Bond Prices

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Author Info
 Dhillon, Upinder S
Johnson, Herb
Abstract

This study examines stock and bond price reactions to dividend changes. The positive stock market response to dividend increases has several potential explanations, two of the more commonly discussed being information content and wealth redistribution between stockholders and bondholders. The evidence presented supports the wealth redistribution hypothesis but does not rule out the information content hypothesis. Typically, the authors find that the bond price reaction to announcements of large dividend changes is opposite to the stock price reaction. Their results differ from those of G. Handjinicolaou and A. Kalay (1984). Copyright 1994 by American Finance Association.

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

Volume (Year): 49 (1994)
Issue (Month): 1 (March)
Pages: 281-89
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Handle: RePEc:bla:jfinan:v:49:y:1994:i:1:p:281-89

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  1. Renneboog, L.D.R. & Szilagyi, Peter G., 2006. "Corporate restructuring and bondholder wealth," Discussion Paper 23, Tilburg University, Center for Economic Research. [Downloadable!]
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  2. Thibault Biebuyck & Ariane Chapelle & Ariane Szafarz, 2002. "Les leviers de contrôle des actionnaires majoritaires," Working Papers CEB 03-001.RS, Université Libre de Bruxelles, Solvay Business School, Centre Emile Bernheim (CEB). [Downloadable!]
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  3. Carlos Martins, 2007. "Consistency of Dividend Signalling and Future Maturity Level:Evidence from UK Data," Working Papers de Economia (Economics Working Papers) 40, Departamento de Economia, Gestão e Engenharia Industrial, Universidade de Aveiro. [Downloadable!]
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