A Theory of Stock Price Responses to Alternative Corporate Cash Disbursement Methods: Stock Repurchases and Dividends
This paper develops a model in which managers can signal their firms' true values by using either a dividend or a stock repurchase or both. The authors explain a number of stylized facts about these cash disbursement mechanisms, particularly those concerning the relative magnitudes of stock price responses to dividends and repurchases. Most importantly, they explain why a stock repurchase elicits a significantly higher price response, on average, than a dividend announcement. Copyright 1987 by American Finance Association.
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Volume (Year): 42 (1987)
Issue (Month): 2 (June)
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- Hakansson, Nils H, 1982. " To Pay or Not to Pay Dividend," Journal of Finance, American Finance Association, vol. 37(2), pages 415-28, May.
- Paul R. Milgrom, 1981.
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071, UCLA Department of Economics.
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- Ambarish, Ramasastry & John, Kose & Williams, Joseph, 1987. " Efficient Signalling with Dividends and Investments," Journal of Finance, American Finance Association, vol. 42(2), pages 321-43, June.
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"Optimal capital structure and project financing,"
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Elsevier, vol. 42(2), pages 209-243, August.
- Besanko, David & Thakor, Anjan V., 1987.
"Competitive equilibrium in the credit market under asymmetric information,"
Journal of Economic Theory,
Elsevier, vol. 42(1), pages 167-182, June.
- David Besanko & Anjan V. Thakor, 2004. "Competitive Equilibrium in the Credit Market under Asymmetric Information," Finance 0411045, EconWPA.
- Spence, Michael, 1974. "Competitive and optimal responses to signals: An analysis of efficiency and distribution," Journal of Economic Theory, Elsevier, vol. 7(3), pages 296-332, March.
- Miller, Merton H & Rock, Kevin, 1985. " Dividend Policy under Asymmetric Information," Journal of Finance, American Finance Association, vol. 40(4), pages 1031-51, September.
- Masulis, Ronald W, 1980. " Stock Repurchase by Tender Offer: An Analysis of the Causes of Common Stock Price Changes," Journal of Finance, American Finance Association, vol. 35(2), pages 305-19, May.
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