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Signalling power of special dividends in an imputation environment


  • Balasingham Balachandran
  • Tuan Anh Nguyen


The present study examines the impact of the announcement of special dividends for a sample of Australian companies over the period July 1989 to June 2002. The risk-adjusted price reaction to special dividend announcements from the day before the announcement to the day after the announcement (day - 1 to day 1) is positive and statistically significant, averaging 3.67 per cent. Initial special dividend announcements (4.68 per cent) led to stronger price reaction than special dividend announcements that follow an earlier special dividend (1.51 per cent) in the previous year. The magnitude of price reactions to special dividend announcements is statistically related to the size of the special dividend, the existence of prior special dividend announcements, abnormal cash flow for the year ended after the special dividend announcement, the existence of dividend reinvestment plans (DRP) versus non-DRP, and a preannouncement effect. Finally, we found strong support for the information content/signalling hypothesis for special dividend announcements that do not participate in DRP and limited support for those associated with DRP. Copyright (c) 2004 Accounting and Finance Association of Australia and New Zealand.

Suggested Citation

  • Balasingham Balachandran & Tuan Anh Nguyen, 2004. "Signalling power of special dividends in an imputation environment," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 44(3), pages 277-297.
  • Handle: RePEc:bla:acctfi:v:44:y:2004:i:3:p:277-297

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    Cited by:

    1. Balachandran, Balasingham & Faff, Robert & Nguyen, Tuan Anh, 2008. "The ex-date impact of special dividend announcements: A note," International Review of Financial Analysis, Elsevier, vol. 17(3), pages 635-643, June.
    2. Balachandran, Balasingham & Faff, Robert & Nguyen, Tuan Anh, 2004. "The intra-industry impact of special dividend announcements: contagion versus competition," Journal of Multinational Financial Management, Elsevier, vol. 14(4-5), pages 369-385.
    3. Jeffrey J. Coulton & Caitlin Ruddock, 2011. "Corporate payout policy in Australia and a test of the life‚Äźcycle theory," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 51(2), pages 381-407, June.

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