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Dividend initiations in reverse‐LBO firms

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  • Arman Kosedag
  • David Michayluk

Abstract

This article documents a lack of share price response to dividend initiation announcements by firms that recently completed a reverse‐LBO. We identify a group of firms that had recently completed an IPO and report that they experience a positive reaction to dividend initiation announcements as expected based on the prior dividend initiation literature. We rule out a size‐based explanation for the abnormal response in reverse‐LBOs and offer some potential explanations for our empirical findings.

Suggested Citation

  • Arman Kosedag & David Michayluk, 2000. "Dividend initiations in reverse‐LBO firms," Review of Financial Economics, John Wiley & Sons, vol. 9(1), pages 55-63, March.
    • Handle: RePEc:wly:revfec:v:9:y:2000:i:1:p:55-63
    DOI: 10.1016/S1058-3300(00)00009-4
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    References listed on IDEAS

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    1. Healy, Paul M. & Palepu, Krishna G., 1988. "Earnings information conveyed by dividend initiations and omissions," Journal of Financial Economics, Elsevier, vol. 21(2), pages 149-175, September.
    2. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    3. Robert O. Edmister & A. Steven Graham & Wendy L. Pirie, 1994. "Excess Returns Of Index Replacement Stocks: Evidence Of Liquidity And Substitutability," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 17(3), pages 333-346, September.
    4. Merton H. Miller & Franco Modigliani, 1961. "Dividend Policy, Growth, and the Valuation of Shares," The Journal of Business, University of Chicago Press, vol. 34, pages 411-411.
    5. Boehmer, Ekkehart & Masumeci, Jim & Poulsen, Annette B., 1991. "Event-study methodology under conditions of event-induced variance," Journal of Financial Economics, Elsevier, vol. 30(2), pages 253-272, December.
    6. Edmister, Robert O & Graham, A Steven & Pirie, Wendy L, 1994. "Excess Returns of Index Replacement Stocks: Evidence of Liquidity and Substitutability," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 17(3), pages 333-346, Fall.
    7. Miller, Merton H & Rock, Kevin, 1985. "Dividend Policy under Asymmetric Information," Journal of Finance, American Finance Association, vol. 40(4), pages 1031-1051, September.
    8. Asquith, Paul & Mullins, David W, Jr, 1983. "The Impact of Initiating Dividend Payments on Shareholders' Wealth," The Journal of Business, University of Chicago Press, vol. 56(1), pages 77-96, January.
    9. Brown, Stephen J. & Warner, Jerold B., 1980. "Measuring security price performance," Journal of Financial Economics, Elsevier, vol. 8(3), pages 205-258, September.
    10. Easterbrook, Frank H, 1984. "Two Agency-Cost Explanations of Dividends," American Economic Review, American Economic Association, vol. 74(4), pages 650-659, September.
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    Cited by:

    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. Ahmad Ahmadpour & Mahmoud yahyazadefar & Babak Garmroudi, 2006. "The Influence of Agency Costs on Dividend Policy in an Emerging Market: “Evidence from the Tehran Stock Exchange”," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 11(1), pages 59-80, winter.
    3. Arman Kosedag & Jamshid Mehran & Jinhu Qian, 2009. "Reverse-LBOs, re-LBOs and informational asymmetry hypothesis of LBO transactions," Managerial Finance, Emerald Group Publishing, vol. 35(8), pages 716-728, July.

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