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Information effects of dividends: Evidence from the Hong Kong market

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Author Info
Louis Cheng ()
Hung-Gay Fung ()
Tak Leung ()
Abstract

The literature has suggested that earnings and earnings forecasts provide stronger signals than dividends about future performance of a firm. We test the information effects of simultaneous announcement of earnings and dividends in the Hong Kong market, distinguished by three interesting features (concentrated family-shareholdings, low corporate transparency, and no tax on dividends). Our results show significant share price reactions to unexpected earnings and dividend changes, but dividends appear to play a dominant role over earnings in pricing, a result contrary to findings in the literature. The signaling hypothesis works primarily for firms with earning increases, while the maturity hypothesis works mainly for firms with earnings declines. Copyright Springer Science+Business Media, LLC 2007

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File URL: http://hdl.handle.net/10.1007/s11156-006-0002-y
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Publisher Info
Article provided by Springer in its journal Review of Quantitative Finance and Accounting.

Volume (Year): 28 (2007)
Issue (Month): 1 (January)
Pages: 23-54
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Handle: RePEc:kap:rqfnac:v:28:y:2007:i:1:p:23-54

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Web page: http://springerlink.metapress.com/link.asp?id=102990

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Related research
Keywords: Earnings; Dividends; Price reaction; Information effects;

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    Other versions:
  4. Robert M. Conroy & Kenneth M. Eades & Robert S. Harris, 2000. "A Test of the Relative Pricing Effects of Dividends and Earnings: Evidence from Simultaneous Announcements in Japan," Journal of Finance, American Finance Association, vol. 55(3), pages 1199-1227, 06. [Downloadable!] (restricted)
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