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Dividend Announcements Reconsidered - Dividend Changes versus Dividend Surprises

Author

Listed:
  • Christian Andres

    (WHU – Otto Beisheim School of Management)

  • André Betzer

    (University of Wuppertal)

  • Inga van den Bongard

    (University of Mannheim)

  • Christian Haesner

    (WHU – Otto Beisheim School of Management)

  • Erik Theissen

    (University of Mannheim)

Abstract

This 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.

Suggested Citation

  • Christian Andres & André Betzer & Inga van den Bongard & Christian Haesner & Erik Theissen, 2011. "Dividend Announcements Reconsidered - Dividend Changes versus Dividend Surprises," Schumpeter Discussion Papers sdp11013, Universitätsbibliothek Wuppertal, University Library.
  • Handle: RePEc:bwu:schdps:sdp11013
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    References listed on IDEAS

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    3. Byson Beracah Majanga, 2015. "The Dividend Effect on Stock Price- An Empirical Analysis of Malawi Listed Companies," Accounting and Finance Research, Sciedu Press, vol. 4(3), pages 1-99, August.

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    More about this item

    Keywords

    Dividend Announcements; Market Efficiency; Ownership Structure; Agency Theory;
    All these keywords.

    JEL classification:

    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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