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Consistency of Dividend Signalling and Future Maturity Level:Evidence from UK Data

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Author Info
Carlos Martins () (Universidade de Aveiro)

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Abstract

This paper analyses the relation between dividends and the mature level of a firm, by using market-to-book ratio as a proxy for Tobin’s Q, and Tobin’s Q as a indicator of either existence of new positive NPV projects or maturity level reached. The existent theory argues that the dividend payment decision either conveys information regarding future earnings (Signalling Theory) or is based on an Agency Theory Problem, concerning both Managers-Shareholders and Shareholders-Debtholders relationships. Here, another dividend signalling power is partially found, as dividend changes in period t seem to indicate a tendency in high Q firms to became more mature in t+1. This relation was not found for low Q firms, indicating that already mature firms do not change their status after a dividend change.

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Publisher Info
Paper provided by Departamento de Economia, Gestão e Engenharia Industrial, Universidade de Aveiro in its series Working Papers de Economia (Economics Working Papers) with number 40.

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Length: 50 pages
Date of creation: Feb 2007
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Handle: RePEc:ave:wpaper:402007

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Related research
Keywords: Dividend Signalling; Mature Firms; Signalling Theory; Payout Policy.;

Find related papers by JEL classification:
G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
C63 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computational Techniques

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    Other versions:
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  21. Black, Fischer & Scholes, Myron, 1974. "The effects of dividend yield and dividend policy on common stock prices and returns," Journal of Financial Economics, Elsevier, vol. 1(1), pages 1-22, May. [Downloadable!] (restricted)
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    Other versions:
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