Work

Communicating Private Information to the Equity Market Before a Dividend Cut: An Empirical Analysis

Year: 2014

Type: article

Abstract: This paper presents the first empirical analysis of the choice of firms regarding whether to release private information (“prepare the market”) in advance of a possible dividend cut and the consequences of such market preparation. We use a hand-collected data set of dividend cutting firms, which allows us to distinguish between prepared and nonprepared dividend cutters and to test the implications of two alternative theories: the “signaling through market preparation” theory and the “stock return volatility reduction” theory. We document several important differences between prepared and nonprepared dividend cutters. Overall, our empirical results are consistent with the signaling theory.

Source: Journal of Financial and Quantitative Analysis

DOI: 10.1017/s0022109014000672

Authors: Thomas J. Chemmanur, Xuan Tian

Institutions: Boston College, Indiana University Bloomington, Indiana University, Tsinghua University

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W3124470313

FWCI: 12.75

Cites: 27

Cited by: 27

Related to: 10