Recent work on stock splits have attempted to relate the information value associated with splits with that from dividends signaling. This paper extends this genre of research by evaluating the issue of dividend predictability using REIT data where the self-selection issue associated with dividend payment is minimized. The use of REIT data also eliminates the “differential expectations” effect for non-dividend paying firms, thus rendering a more robust test of the information substitutability hypothesis postulated by Nayak and Prabhala (2001). To the extent that stock splits are signals of future cash flows, we further examine the question of leverage predictability associated with REIT splits, particularly for highly levered firms. We find that REITs that use dividend changes as a signaling mechanism prior to splits have smaller price responses to the private information revealed by splits than those that do not provide such signals, consistent with the notion that dividends and splits are indeed information substitutes. Further, REIT splits provide useful information about future dividend and leverage changes. Copyright Springer Science + Business Media, LLC 2006
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Volume (Year): 33 (2006) Issue (Month): 2 (September) Pages: 127-150 Download reference. The following formats are available: HTML
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Jarl G. Kallberg & Crocker H. Liu & Anand Srinivasan, 2003.
"Dividend Pricing Models and REITs,"
Real Estate Economics,
American Real Estate and Urban Economics Association, vol. 31(3), pages 435-450, 09.
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Myers, Stewart C., 1984.
"Capital structure puzzle,"
Working papers
1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
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