IDEAS home Printed from https://ideas.repec.org/a/ibn/ijefaa/v10y2018i4p84-94.html
   My bibliography  Save this article

Dividend Policy in Tunisia: A Signalling Approach

Author

Listed:
  • Taleb Lotfi

Abstract

The main objective of this study was to establish the stock price reaction to dividend announcements of firms quoted at the Tunisian Securities exchange (TSE). To do so, we develop a traditional event study. Two robust results emerge: First, when we observe the 196 announcements of dividends between years 1996-2004, the result is inconsistent with signaling theory, as long as, no abnormal return was observed on the announcement day (event period). Second, When the overall sample is divided into three sub-group (dividend increase, dividend-no-change and dividend), we observe a significant and abnormal return about -1.242 percent and -1.697 percent respectively on day D(t0-4) and D(t0+4) around the dividend announcement day (Dt0) only for the sub-group of firms that decreases their dividend. This result corroborates prior research in Tunisian context [Ben Naceur and al. (2006); Guizani and Kouki (2011)] that confirm, by using a different approach, the Lintner¡¯s (1956) conclusions which states that Tunisian¡¯ firms generally tend to avoid a dividend decrease (or cuts) and can constitute a supporting evidence of the dividend information content hypothesis in TSE.

Suggested Citation

  • Taleb Lotfi, 2018. "Dividend Policy in Tunisia: A Signalling Approach," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(4), pages 84-94, April.
    • Handle: RePEc:ibn:ijefaa:v:10:y:2018:i:4:p:84-94
    as

    Download full text from publisher

    File URL: http://ccsenet.org/journal/index.php/ijef/article/view/73076/40688
    Download Restriction: no
    File URL: http://ccsenet.org/journal/index.php/ijef/article/view/73076
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Fama, Eugene F. & French, Kenneth R., 1988. "Dividend yields and expected stock returns," Journal of Financial Economics, Elsevier, vol. 22(1), pages 3-25, October.
    2. Bernheim, B Douglas & Wantz, Adam, 1995. "A Tax-Based Test of the Dividend Signaling Hypothesis," American Economic Review, American Economic Association, vol. 85(3), pages 532-551, June.
    3. Beaver, Wh, 1968. "Information Content Of Annual Earnings Announcements," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 6, pages 67-92.
    4. Benartzi, Shlomo & Michaely, Roni & Thaler, Richard H, 1997. "Do Changes in Dividends Signal the Future or the Past?," Journal of Finance, American Finance Association, vol. 52(3), pages 1007-1034, July.
    5. Best, Roger J & Best, Ronald W, 2001. "Prior Information and the Market Reaction to Dividend Changes," Review of Quantitative Finance and Accounting, Springer, vol. 17(4), pages 361-376, December.
    6. Bar-Yosef, Sasson & Kolodny, Richard, 1976. "Dividend Policy and Capital Market Theory," The Review of Economics and Statistics, MIT Press, vol. 58(2), pages 181-190, May.
    7. Barclay, Michael J., 1987. "Dividends, taxes, and common stock prices : The ex-dividend day behavior of common stock prices before the income tax," Journal of Financial Economics, Elsevier, vol. 19(1), pages 31-44, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Frankfurter, George M. & Wood, Bob Jr., 2002. "Dividend policy theories and their empirical tests," International Review of Financial Analysis, Elsevier, vol. 11(2), pages 111-138.
    2. Cheng Few Lee & Manak C. Gupta & Hong-Yi Chen & Alice C. Lee, 2020. "Optimal Payout Ratio Under Uncertainty and the Flexibility Hypothesis: Theory and Empirical Evidence," World Scientific Book Chapters, in: Cheng Few Lee & John C Lee (ed.), HANDBOOK OF FINANCIAL ECONOMETRICS, MATHEMATICS, STATISTICS, AND MACHINE LEARNING, chapter 96, pages 3367-3412, World Scientific Publishing Co. Pte. Ltd..
    3. Michaely, Roni & Rossi, Stefano & Weber, Michael, 2021. "Signaling safety," Journal of Financial Economics, Elsevier, vol. 139(2), pages 405-427.
    4. Murphy, A. & Schlag, C., 1999. "An empirical examination of the effect of dividend taxation on asset pricing and returns in Germany," Global Finance Journal, Elsevier, vol. 10(1), pages 35-52.
    5. Paul Tanyi & David B. Smith & Xiaoyan Cheng, 2021. "Does firm payout policy affect shareholders’ dissatisfaction with directors?," Review of Quantitative Finance and Accounting, Springer, vol. 57(1), pages 279-320, July.
    6. Kryzanowski, Lawrence & Mohsni, Sana, 2015. "Earnings forecasts and idiosyncratic volatilities," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 107-123.
    7. Mohit Gupta & Navdeep Aggarwal, 2018. "Signaling Effect of Shifts in Dividend Policy: Evidence from Indian Capital Markets," Business Perspectives and Research, , vol. 6(2), pages 142-153, July.
    8. Xin Che & Andre P. Liebenberg & Ivonne A. Liebenberg & Brandon C. L. Morris, 2018. "The effect of growth opportunities on the market reaction to dividend cuts: evidence from the 2008 financial crisis," Review of Quantitative Finance and Accounting, Springer, vol. 51(1), pages 1-17, July.
    9. Kumar, Satish, 2017. "New evidence on stock market reaction to dividend announcements in India," Research in International Business and Finance, Elsevier, vol. 39(PA), pages 327-337.
    10. Mihir A. Desai & C. Fritz Foley & James R. Hines Jr., 2002. "Dividend Policy inside the Firm," NBER Working Papers 8698, National Bureau of Economic Research, Inc.
    11. Raj Chetty & Joseph Rosenberg & Emmanuel Saez, 2005. "The Effects of Taxes on Market Responses to Dividend Announcements and Payments: What Can we Learn from the 2003 Dividend Tax Cut?," NBER Working Papers 11452, National Bureau of Economic Research, Inc.
    12. Jan Bena & Jan Hanousek, 2008. "Rent Extraction by Large Shareholders: Evidence Using Dividend Policy in the Czech Republic," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 58(03-04), pages 106-130, May.
    13. Bai-Sian Chen & Hong-Yi Chen & Hsiao-Yin Chen & Fang-Chi Lin, 2022. "Corporate growth and strategic payout policy," Review of Quantitative Finance and Accounting, Springer, vol. 59(2), pages 641-669, August.
    14. Fayez A. Elayan & Jingyu Li & Maureen E. Donnelly & Allister W. Young, 2009. "Changes to Income Trust Taxation in Canada: Investor Reaction and Dividend Clientele Theory," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(5-6), pages 725-753.
    15. Chou, De-Wai & Liu, Yi & Zantout, Zaher, 2009. "Long-term stock performance following extraordinary and special cash dividends," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(1), pages 54-73, February.
    16. Blau, Benjamin M. & Fuller, Kathleen P. & Van Ness, Robert A., 2011. "Short selling around dividend announcements and ex-dividend days," Journal of Corporate Finance, Elsevier, vol. 17(3), pages 628-639, June.
    17. Wei Hao & Udomsak Wongchoti & Martin Young & Jianguo Chen, 2021. "R2 and the corporate signaling effect," International Review of Finance, International Review of Finance Ltd., vol. 21(4), pages 1353-1381, December.
    18. Charles G. Ham & Zachary R. Kaplan & Steven Utke, 2023. "Attention to dividends, inattention to earnings?," Review of Accounting Studies, Springer, vol. 28(1), pages 265-306, March.
    19. Taeyoon Sung & Daehwan Kim & Ludwig Chincarini, 2006. "Corporate scandals and the market response of dividend payout changes," Applied Financial Economics, Taylor & Francis Journals, vol. 16(7), pages 535-549.
    20. Xin Che & Kathleen P. Fuller, 2020. "What does the timing of dividend reductions signal?," Review of Quantitative Finance and Accounting, Springer, vol. 55(3), pages 1035-1061, October.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ibn:ijefaa:v:10:y:2018:i:4:p:84-94. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Canadian Center of Science and Education (email available below). General contact details of provider: https://edirc.repec.org/data/cepflch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.