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Underreaction to Dividend Reductions and Omissions?

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  • YI LIU
  • SAMUEL H. SZEWCZYK
  • ZAHER ZANTOUT
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    Abstract

    Using a sample of 2,337 cash dividend reduction or omission announcements over the 1927 to 1999 period, this study reports significant negative post-announcement long-term abnormal returns, which last 1 year only. However, this long-term abnormal performance is driven by the post-earnings-announcement drift. After controlling for the earnings performance and the skewness of buy-and-hold abnormal returns, there is no compelling evidence of a post-dividend-reduction or post-dividend-omission price drift. Copyright 2008 by The American Finance Association.

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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1540-6261.2008.01337.x
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    Bibliographic Info

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

    Volume (Year): 63 (2008)
    Issue (Month): 2 (04)
    Pages: 987-1020

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    Handle: RePEc:bla:jfinan:v:63:y:2008:i:2:p:987-1020

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    Cited by:
    1. Hartzmark, Samuel M. & Solomon, David H., 2013. "The dividend month premium," Journal of Financial Economics, Elsevier, vol. 109(3), pages 640-660.
    2. Karpavičius, Sigitas, 2014. "Dividends: Relevance, rigidity, and signaling," Journal of Corporate Finance, Elsevier, vol. 25(C), pages 289-312.
    3. Mohsen Saad & Zaher Zantout, 2014. "Over-investment in corporate R&D, risk, and stock returns," Journal of Economics and Finance, Springer, vol. 38(3), pages 438-460, July.
    4. Dasilas, Apostolos & Leventis, Stergios, 2011. "Stock market reaction to dividend announcements: Evidence from the Greek stock market," International Review of Economics & Finance, Elsevier, vol. 20(2), pages 302-311, April.
    5. Liang, Hui & Moreau, Laura & Park, Jung Chul, 2011. "Investment opportunities and dividend omissions," Journal of Business Research, Elsevier, vol. 64(10), pages 1108-1115, October.

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