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Shareholder wealth effects of stock dividends in a unique environment

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  • Al-Yahyaee, Khamis Hamed

Abstract

We investigate shareholder wealth effects of stock dividends using a unique dataset from Oman in which many market frictions that are used to explain the stock dividend announcement effect are either absent or limited. We find a positive stock market reaction to stock dividend distributions. We also find that firms that distribute stock dividends experience favorable changes in operating performance during the seven-year period around the stock dividend distribution. Our results suggest that stock dividends are used primarily to signal future operating performance and to a lesser extent to reduce stock prices to an optimal trading range.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.

Volume (Year): 28 (2014)
Issue (Month): C ()
Pages: 66-81

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Handle: RePEc:eee:intfin:v:28:y:2014:i:c:p:66-81

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Web page: http://www.elsevier.com/locate/intfin

Related research

Keywords: Stock dividends; Trading range; Market microstructure; Bid-ask spread; Signaling;

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