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Are Dividend Changes a Sign of Firm Maturity?

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Author Info
Gustavo Grullon (Rice University)
Roni Michaely (Cornell University and the Inter-Disciplinary Center)
Bhaskaran Swaminathan (Cornell University)

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Abstract

Firms that increase (decrease) dividends experience a significant decline (increase) in their systematic risk. The dividend-increasing firms do not increase their capital expenditure and experience a decline in profitability in the years after the dividend change. The positive market reaction to a dividend increase is significantly related to the subsequent decline in systematic risk. In the long run, the dividendincreasing firms with the largest decline in systematic risk also experience the largest increase in price over the next three years, suggesting that the market reaction to dividend changes may not incorporate the full extent of the decline in the cost of capital associated with dividend changes.

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File URL: http://www.journals.uchicago.edu/cgi-bin/resolve?JB750301
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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Business.

Volume (Year): 75 (2002)
Issue (Month): 3 (July)
Pages: 387-424
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:ucp:jnlbus:v:75:y:2002:i:3:p:387-424

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  1. Aaro Hazak, 2006. "Dividend Decision under Distributed Profit Taxation: Investor’s Perspective," Working Papers 145, School of Economics and Business Administration, Tallinn University of Technology. [Downloadable!]
  2. Robert Chirinko & Ulf von Kalckreuth, 2003. "Further Evidence On The Relationship Between Firm Investment And Financial Status," Emory Economics 0302, Department of Economics, Emory University (Atlanta). [Downloadable!]
    Other versions:
  3. Louis Cheng & Hung-Gay Fung & Tak Leung, 2007. "Information effects of dividends: Evidence from the Hong Kong market," Review of Quantitative Finance and Accounting, Springer, vol. 28(1), pages 23-54, January. [Downloadable!] (restricted)
  4. Christian Leuz & Catherine Schrand, 2009. "Disclosure and the Cost of Capital: Evidence from Firms’ Responses to the Enron Shock," NBER Working Papers 14897, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Mihir A. Desai & Li Jin, 2007. "Institutional Tax Clienteles and Payout Policy," NBER Working Papers 13283, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Martin D. Dietz & Christian Keuschnigg, 2003. "Corporate Income Tax Reform in Switzerland," University of St. Gallen Department of Economics working paper series 2003 2003-07, Department of Economics, University of St. Gallen. [Downloadable!]
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  7. Jacob Boudoukh & Roni Michaely & Matthew Richardson & Michael Roberts, 2004. "On the Importance of Measuring Payout Yield: Implications for Empirical Asset Pricing," NBER Working Papers 10651, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Carlos Martins, 2007. "Consistency of Dividend Signalling and Future Maturity Level:Evidence from UK Data," Working Papers de Economia (Economics Working Papers) 40, Departamento de Economia, Gestão e Engenharia Industrial, Universidade de Aveiro. [Downloadable!]
  9. Christian Keuschnigg & Martin Dietz, 2007. "A growth oriented dual income tax," International Tax and Public Finance, Springer, vol. 14(2), pages 191-221, April. [Downloadable!] (restricted)
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  10. Christophe, Faugere, 2003. "A Required Yield Theory of Stock Market Valuation and Treasury Yield Determination," MPRA Paper 15579, University Library of Munich, Germany, revised 04 Jun 2009. [Downloadable!]
  11. Alon Brav & John R. Graham & Campbell R. Harvey & Roni Michaely, 2003. "Payout Policy in the 21st Century," NBER Working Papers 9657, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Luís Krug Pacheco & Clara Raposo, 2009. "The Capital And Cash Flow Sources And Uses Of Initial Stock Repurchase Firms," Documentos de Trabalho em Gestão (Working Papers in Management) 07, Faculdade de Economia e Gestão, Universidade Católica Portuguesa (Porto). [Downloadable!]
  13. Renneboog, L.D.R. & Trojanowski, Grzegorz, 2005. "Patterns in payout policy and payout channel choice of UK firms in the 1990s," Discussion Paper 22, Tilburg University, Center for Economic Research. [Downloadable!]
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  14. Luís Krug Pacheco & Clara Raposo, 2009. "On The Timing Of Initial Stock Repurchases," Documentos de Trabalho em Gestão (Working Papers in Management) 06, Faculdade de Economia e Gestão, Universidade Católica Portuguesa (Porto). [Downloadable!]
  15. Christi Wann & D. Long, 2009. "Do liquidity induced changes in aggregate dividends signal aggregate future earnings growth?," Journal of Economics and Finance, Springer, vol. 33(1), pages 1-12, January. [Downloadable!] (restricted)
  16. Bogdan Stacescu, 2006. "Dividend Policy in Switzerland," Financial Markets and Portfolio Management, Springer, vol. 20(2), pages 153-183, June. [Downloadable!] (restricted)
  17. Harry DeAngelo & Linda DeAngelo & Rene Stulz, 2004. "Dividend Policy, Agency Costs, and Earned Equity," NBER Working Papers 10599, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  18. DeAngelo, Harry & DeAngelo, Linda & Stulz, Rene M., 2004. "Dividend Policy, Agency Costs, and Earned Equity," Working Paper Series 2004-10, Ohio State University, Charles A. Dice Center for Research in Financial Economics. [Downloadable!]
  19. Renneboog, L.D.R. & Trojanowski, G., 2005. "Control structures and payout policy," Discussion Paper 14, Tilburg University, Tilburg Law and Economic Center. [Downloadable!]
    Other versions:
  20. Arturo, Ramirez Verdugo, 2004. "Dividend Signaling and Unions," MPRA Paper 2273, University Library of Munich, Germany, revised 04 Oct 2006. [Downloadable!]
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