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Earnings and Dividend Announcements: Is There a Corroboration Effect?

  • Kane, Alex
  • Lee, Young Ki
  • Marcus, Alan

We examine abnormal stock returns surrounding contemporaneous earnings and dividend announcements in order to determine whether investors evaluate the two announcements in relation to each other.We find that there is a statistically significant interaction effect.The abnormal return corresponding to any earnings or dividend announcement depends upon the value of the other announcement. This evidence suggests the existence of a corroborative relationship between the two announcements. Investors give more credence to unanticipated dividend increases or decreases when earnings are also above or below expectations, and vice versa.

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Article provided by American Finance Association in its journal Journal of Finance.

Volume (Year): 39 (1984)
Issue (Month): 4 (September)
Pages: 1091-99

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Handle: RePEc:bla:jfinan:v:39:y:1984:i:4:p:1091-99
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  1. Miller, Merton H & Scholes, Myron S, 1982. "Dividends and Taxes: Some Empirical Evidence," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1118-41, December.
  2. Pettit, R Richardson, 1976. "The Impact of Dividend and Earnings Announcements: A Reconciliation," The Journal of Business, University of Chicago Press, vol. 49(1), pages 86-96, January.
  3. Watts, Ross L, 1976. "Comments on "The Impact of Dividend and Earnings Announcements: A Reconciliation."," The Journal of Business, University of Chicago Press, vol. 49(1), pages 97-106, January.
  4. Brown, Stewart L, 1978. "Earnings Changes, Stock Prices, and Market Efficiency," Journal of Finance, American Finance Association, vol. 33(1), pages 17-28, March.
  5. Watts, Ross L, 1976. "Comments on "On the Informational Content of Dividends."," The Journal of Business, University of Chicago Press, vol. 49(1), pages 81-85, January.
  6. Divecha, Arjun & Morse, Dale, 1983. "Market Responses to Dividend Increases and Changes in Payout Ratios," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 18(02), pages 163-173, June.
  7. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  8. Watts, Ross, 1973. "The Information Content of Dividends," The Journal of Business, University of Chicago Press, vol. 46(2), pages 191-211, April.
  9. Kaplan, Robert S & Roll, Richard, 1972. "Investor Evaluation of Accounting Information: Some Empirical Evidence," The Journal of Business, University of Chicago Press, vol. 45(2), pages 225-57, April.
  10. Pettit, R Richardson, 1972. "Dividend Announcements, Security Performance, and Capital Market Efficiency," Journal of Finance, American Finance Association, vol. 27(5), pages 993-1007, December.
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