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Signaling Effect of Dividend on Firm’s Future Performance: A Study of Select Emerging Economies

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  • Sunaina Kanojia
  • Bunny Singh Bhatia

Abstract

The present study examines the signaling effects of a firm’s dividend policy in developing economies (India, Brazil, China, and Taiwan) from 2010 to 2020 in 4,630 companies’ observations. It highlights that the Indian market indicates greater intensity to the signaling model, though no such reactions were recorded in the Brazilian and Taiwanese markets. Further, the Lintner partial adjustment model reveals that companies in India adjust dividends at a slower rate as compared to other emerging markets like China, Brazil, and Taiwan. We found that the Lintner model is the behavioral consequence of the applicability or non-applicability of dividend signaling theory in these emerging economies. JEL Codes: G35, C32, G15

Suggested Citation

  • Sunaina Kanojia & Bunny Singh Bhatia, 2023. "Signaling Effect of Dividend on Firm’s Future Performance: A Study of Select Emerging Economies," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 22(4), pages 409-436, December.
    • Handle: RePEc:sae:emffin:v:22:y:2023:i:4:p:409-436
    DOI: 10.1177/09726527231182279
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    Keywords

    Dividend; signaling theory; emerging markets; Granger causality test; panel regression;
    All these keywords.

    JEL classification:

    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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