Dividend Announcements Reconsidered - Dividend Changes versus Dividend Surprises
AbstractThis paper reconsiders the issue of share price reactions to dividend announcements. Previous papers rely almost exclusively on a naive dividend model in which the dividend change is used as a proxy for the dividend surprise. We use the difference between the actual dividend and the analyst consensus forecast as obtained from I/B/E/S as a proxy for the dividend surprise. Using data from Germany, we find significant share price reactions after dividend announcements. Once we control for analysts’ expectations, the dividend change loses explanatory power. Our results thus suggest that the naive model should be abandoned. We use panel methods to analyze the determinants of the share price reactions. We find (weak) support in favor of the dividend signaling hypothesis and no support for either the free cash flow hypothesis or the rent extraction hypothesis.
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Bibliographic InfoPaper provided by Universitätsbibliothek Wuppertal, University Library in its series Schumpeter Discussion Papers with number sdp11013.
Date of creation: Oct 2011
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Web page: http://elpub.bib.uni-wuppertal.de
Dividend Announcements; Market Efficiency; Ownership Structure; Agency Theory;
Other versions of this item:
- Andres, Christian & Betzer, André & van den Bongard, Inga & Haesner, Christian & Theissen, Erik, 2012. "Dividend announcements reconsidered: Dividend changes versus dividend surprises," CFR Working Papers 12-03, University of Cologne, Centre for Financial Research (CFR).
- G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-22 (All new papers)
- NEP-CFN-2011-10-22 (Corporate Finance)
- NEP-CIS-2011-10-22 (Confederation of Independent States)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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