Javier Gardeazabal () (Universidad del País Vasco / The University of the Basque Country) Marta Regulez () (Universidad del País Vasco / The University of the Basque Country)
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In this paper we develop an econometric test of a corollary of the irrelevance of the dividend policy principle, namely, that the rescheduling of dividends does not affect the market valuation of the firm. In particular, the market value of the firm should not change if the firm reschedules dividends from one day to another day. This proposition is tested by regressing daily stock returns on a weekend dummy, a dividend dummy and their interaction. The first two variables should capture the weekend and dividend effects. The interaction term should be insignificant if rescheduling of dividends does not affect the market valuation of stocks. Formal econometric evidence finds no indication of a significant weekend effect, though, at the individual level, some stocks yield abnormal returns on ex-dividend days and when dividends are scheduled on days after weekends or holidays. Firms could partially make up the price drop on ex-dividend days by scheduling dividend payments after a weekend or a holiday. However, the evidence suggests that firms do not use such policy.
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Paper provided by University of the Basque Country - Department of Foundations of Economic Analysis II in its series DFAEII Working Papers with number
200218.
Order Information: Postal: Dpto. de Fundamentos del Análisis Económico II, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain Email:
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