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The Valuation Impacts of Specially Designated Dividends

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  • Jayaraman, Narayanan
  • Shastri, Kuldeep

Abstract

This paper examines the valuation impacts of specially designated dividends (SDDs) by analyzing the behavior of stock and bond prices on dates surrounding their announcements. The evidence presented here suggests that SDDs are considered positive signals by the market, with (most of) the gains associated with their announcements accruing to stockholders. In addition, we present some evidence that the gain to stockholders is negatively related to the frequency of SDD announcements.

Suggested Citation

  • Jayaraman, Narayanan & Shastri, Kuldeep, 1988. "The Valuation Impacts of Specially Designated Dividends," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(03), pages 301-312, September.
  • Handle: RePEc:cup:jfinqa:v:23:y:1988:i:03:p:301-312_01
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    1. Cox, John C & Ingersoll, Jonathan E, Jr & Ross, Stephen A, 1981. "A Re-examination of Traditional Hypotheses about the Term Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 36(4), pages 769-799, September.
    2. Livingston, Miles B & Jain, Suresh K, 1982. " Flattening of Bond Yield Curves for Long Maturities," Journal of Finance, American Finance Association, vol. 37(1), pages 157-167, March.
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    Cited by:

    1. Maul, D. & Schiereck, D., 2016. "The bond event study methodology since 1974," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 80723, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    2. Adams, John C. & Mansi, Sattar A., 2009. "CEO turnover and bondholder wealth," Journal of Banking & Finance, Elsevier, vol. 33(3), pages 522-533, March.
    3. 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.
    4. 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, pages 369-385.
    5. Kitsabunnarat-Chatjuthamard, Pattanaporn & Lung, Peter & Nishikawa, Takeshi & Rao, Ramesh P., 2010. "Leverage-reducing exchange offers and bondholder-stockholder wealth transfers: A re-evaluation," International Review of Economics & Finance, Elsevier, vol. 19(1), pages 81-94, January.
    6. Elliott, William B. & Prevost, Andrew K. & Rao, Ramesh P., 2009. "The announcement impact of seasoned equity offerings on bondholder wealth," Journal of Banking & Finance, Elsevier, vol. 33(8), pages 1472-1480, August.
    7. Luc Renneboog & Peter G. Szilagyi, 2008. "Corporate Restructuring and Bondholder Wealth," European Financial Management, European Financial Management Association, vol. 14(4), pages 792-819.
    8. Asquith, Paul, 1948- & Wizman, Thierry A., 1990. "Event risk, covenants, and bondholder returns in leveraged buyouts," Working papers WP 3173-90., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    9. Tsai, Hui-Ju & Wu, Yangru, 2015. "Bond and stock market response to unexpected dividend changes," Journal of Empirical Finance, Elsevier, pages 1-15.
    10. Datta, Sudip & Iskandar-Datta, Mai, 1996. "Takeover defenses and wealth effects on securityholders: The case of poison pill adoptions," Journal of Banking & Finance, Elsevier, vol. 20(7), pages 1231-1250, August.
    11. Ederington, Louis & Guan, Wei & Yang, Lisa (Zongfei), 2015. "Bond market event study methods," Journal of Banking & Finance, Elsevier, vol. 58(C), pages 281-293.
    12. Mathur, Ike & Singh, Manohar & Nejadmalayeri, Ali & Jiraporn, Pornsit, 2013. "How do bond investors perceive dividend payouts?," Research in International Business and Finance, Elsevier, pages 92-105.
    13. DeAngelo, Harry & DeAngelo, Linda & Skinner, Douglas J., 2000. "Special dividends and the evolution of dividend signaling," Journal of Financial Economics, Elsevier, vol. 57(3), pages 309-354, September.
    14. Szilagyi, P.G., 2007. "Corporate governance and the agency costs of debt and outside equity," Other publications TiSEM 9520d40a-224f-43a8-9bf9-b, Tilburg University, School of Economics and Management.

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