Dividend initiations and long-run IPO performance
AbstractDividend initiations are an economically significant event that has important implications for a firmâ€™s future financial capacity. Given the marketâ€™s expectation of a consistent payout, managers of IPO firms must approach the initial dividend decision cautiously. We compare the long-run performance of IPO firms that initiated a dividend with that of similarly matched non-payers, and find robust results that firms which initiated a dividend perform significantly better up to five years after the initiation date. Further tests show that the post-initiation firm performance is explained mostly by dividend theory of signalling rather than free cash flow.
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Bibliographic InfoArticle provided by Australian School of Business in its journal Australian Journal of Management.
Volume (Year): 36 (2011)
Issue (Month): 2 (August)
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Web page: http://www.agsm.edu.au
Dividend initiation; free cash flows; IPOs; long-run performance; signaling;
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