The Impact of Dividend Initiation on the Earnings Announcements and Returns Volatility
This article provides some evidence on the empirical consequences of initiating dividends. First, it documents that the information content of quarterly earnings announcements decreases after the introduction of cash dividends. This suggests that dividends and earnings are partial "information substitutes." The second finding is that the volatility of total daily returns decreases after the initiation of dividends and that most of this decrease is attributable to a decrease in the firm-specific volatility. A possible reason for this is that, in the postdividend period, investors place less weight (relative to the predividend period) on other "information signals" and, hence, observed volatility may be lower. Copyright 1989 by the University of Chicago.
When requesting a correction, please mention this item's handle: RePEc:ucp:jnlbus:v:62:y:1989:i:2:p:175-97. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division)
If references are entirely missing, you can add them using this form.