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Information Flow and Liquidity around Anticipated and Unanticipated Dividend Announcements

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Author Info

  • John R. Graham

    (Duke University)

  • Jennifer L. Koski

    (University of Washington)

  • Uri Loewenstein

    (University of Utah)

Abstract

We study dividend announcements, conditioning on whether the timing of the announcement is anticipated. We find that liquidity deteriorates before (after) anticipated (unanticipated) announcements. We identify both timing and content effects and also contrast trading volume, price volatility, adverse selection, and price impact separately for anticipated and unanticipated events. Our results generally imply that news announcements reduce information asymmetry. An implication of our analysis is that market reactions around information events differ depending on whether an event's timing is known in advance. Therefore, researchers should consider whether event timing is known ex ante when studying news announcements.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Business.

Volume (Year): 79 (2006)
Issue (Month): 5 (September)
Pages: 2301-2336

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Handle: RePEc:ucp:jnlbus:v:79:y:2006:i:5:p:2301-2336

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Web page: http://www.journals.uchicago.edu/JB/

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Cited by:
  1. Groß-Klußmann, Axel & Hautsch, Nikolaus, 2009. "Quantifying high-frequency market reactions to real-time news sentiment announcements," CFS Working Paper Series 2009/31, Center for Financial Studies (CFS).
  2. AltInkIlIç, Oya & Hansen, Robert S., 2009. "On the information role of stock recommendation revisions," Journal of Accounting and Economics, Elsevier, vol. 48(1), pages 17-36, October.
  3. Kryzanowski, Lawrence & Lazrak, Skander & Rakita, Ian, 2010. "Behavior of liquidity and returns around Canadian seasoned equity offerings," Journal of Banking & Finance, Elsevier, vol. 34(12), pages 2954-2967, December.
  4. Gomber, Peter & Schweickert, Uwe & Theissen, Erik, 2011. "Liquidity dynamics in an electronic open limit order book: An event study approach," CFR Working Papers 11-14, University of Cologne, Centre for Financial Research (CFR).
  5. Erenburg, Grigori & Lasser, Dennis, 2009. "Electronic limit order book and order submission choice around macroeconomic news," Review of Financial Economics, Elsevier, vol. 18(4), pages 172-182, October.
  6. Hartzmark, Samuel M. & Solomon, David H., 2013. "The dividend month premium," Journal of Financial Economics, Elsevier, vol. 109(3), pages 640-660.

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