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Underreaction to Dividend Reductions and Omissions?

Author

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  • YI LIU
  • SAMUEL H. SZEWCZYK
  • ZAHER ZANTOUT

Abstract

Using a sample of 2,337 cash dividend reduction or omission announcements over the 1927 to 1999 period, this study reports significant negative post-announcement long-term abnormal returns, which last 1 year only. However, this long-term abnormal performance is driven by the post-earnings-announcement drift. After controlling for the earnings performance and the skewness of buy-and-hold abnormal returns, there is no compelling evidence of a post-dividend-reduction or post-dividend-omission price drift. Copyright 2008 by The American Finance Association.

Suggested Citation

  • Yi Liu & Samuel H. Szewczyk & Zaher Zantout, 2008. "Underreaction to Dividend Reductions and Omissions?," Journal of Finance, American Finance Association, vol. 63(2), pages 987-1020, April.
  • Handle: RePEc:bla:jfinan:v:63:y:2008:i:2:p:987-1020
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    Cited by:

    1. repec:bla:jfnres:v:40:y:2017:i:3:p:287-313 is not listed on IDEAS
    2. Karpavičius, Sigitas, 2014. "Dividends: Relevance, rigidity, and signaling," Journal of Corporate Finance, Elsevier, vol. 25(C), pages 289-312.
    3. repec:eee:corfin:v:45:y:2017:i:c:p:162-175 is not listed on IDEAS
    4. Hartzmark, Samuel M. & Solomon, David H., 2013. "The dividend month premium," Journal of Financial Economics, Elsevier, vol. 109(3), pages 640-660.
    5. repec:kap:rqfnac:v:49:y:2017:i:3:d:10.1007_s11156-016-0603-z is not listed on IDEAS
    6. Bozos, Konstantinos & Nikolopoulos, Konstantinos & Ramgandhi, Ghanamaruthy, 2011. "Dividend signaling under economic adversity: Evidence from the London Stock Exchange," International Review of Financial Analysis, Elsevier, vol. 20(5), pages 364-374.
    7. Dasilas, Apostolos & Leventis, Stergios, 2011. "Stock market reaction to dividend announcements: Evidence from the Greek stock market," International Review of Economics & Finance, Elsevier, vol. 20(2), pages 302-311, April.
    8. Mohsen Saad & Zaher Zantout, 2014. "Over-investment in corporate R&D, risk, and stock returns," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 38(3), pages 438-460, July.
    9. Liang, Hui & Moreau, Laura & Park, Jung Chul, 2011. "Investment opportunities and dividend omissions," Journal of Business Research, Elsevier, vol. 64(10), pages 1108-1115, October.

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