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Author: Michelle Hanlon
Publisher:
ISBN:
Category :
Languages : en
Pages : 44
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Book Description
This paper investigates whether dividends are informative about a firm's future earnings. We examine this issue by investigating the association between current year stock returns and current and future earnings for firms that pay dividends in the current year as compared to firms that do not pay dividends. The data reveal that relative to non-dividend paying firms, dividend paying firms have current returns that are more associated with future earnings. In addition, we report results consistent with the market having a better understanding of a firm's future earnings after a dividend initiation relative to before. Overall, our results are consistent with dividends providing relevant information about future earnings to the market that is not in current earnings and that this information is incorporated into stock price.
Author: Michelle Hanlon
Publisher:
ISBN:
Category :
Languages : en
Pages : 44
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Book Description
This paper investigates whether dividends are informative about a firm's future earnings. We examine this issue by investigating the association between current year stock returns and current and future earnings for firms that pay dividends in the current year as compared to firms that do not pay dividends. The data reveal that relative to non-dividend paying firms, dividend paying firms have current returns that are more associated with future earnings. In addition, we report results consistent with the market having a better understanding of a firm's future earnings after a dividend initiation relative to before. Overall, our results are consistent with dividends providing relevant information about future earnings to the market that is not in current earnings and that this information is incorporated into stock price.
Author: Charles (Chad) Ham
Publisher:
ISBN:
Category :
Languages : en
Pages : 59
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Book Description
Yes. We show that dividend changes contain information about highly persistent changes in future economic income. Three methodological differences lead us to different conclusions from the extant literature: (i) we use an “event window approach” to cleanly delineate earnings after dividend changes from those before, (ii) we use alternative earnings measures to control for endogenous investment and asset write-downs surrounding dividend changes and (iii) we control for the non-linear relation between dividend changes and market reactions. Our results suggest dividend announcement returns reflect information about the level of permanent earnings, though the timing of the information content is difficult to reconcile with traditional signaling models.
Author: Paul M. Healy
Publisher: Forgotten Books
ISBN: 9780267417711
Category : Business & Economics
Languages : en
Pages : 26
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Book Description
Excerpt from Corporate Financial Decisions and Future Earnings Performance: The Case of Initiating Dividends Dividend policy has several attractive aspects as an information transmission mechanism. Unlike the detailed focus of other announcements, dividends can be used as a simple, comprehensive signal of management's interpretation of the firm's recent performance and its future prospects. Unlike most announcements, dividend announcements must be backed with hard cold cash. The firm must either generate this cash or convince the capital markets to supply it. In addition to the credibility of cash signals, dividends are also highly visible compared with other announcements. (p.9é) A second dividend hypothesis proposed in the literature competes with the information signaling hypothesis and also predicts a positive stock price reaction to dividend announcements. Graham and Dodd Gordon and Gordon and Bradford suggest that the investors prefer returns in the form of dividends, possibly because of institutional constraints. This proposition is consistent with a positive wealth impact of dividend announcements and with the results of Long's (1978) examination of the returns on the dual series common stock of a single firm. A key distinction between the information signaling hypothesis and this other explanation of the dividend announcement effect is that, while the signaling hypothesis explicitly links the announcement of dividends and the firm's current and future performance, no such link is implied by the competing explanation. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.
Author: Paul M. Healy
Publisher: Forgotten Books
ISBN: 9781330359389
Category : Business & Economics
Languages : en
Pages : 25
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Book Description
Excerpt from Corporate Financial Decisions and Future Earnings Performance: The Case of Initiating Dividends The impact of a firm's dividend policy on its value has been a subject of long-standing debate in the finance literature. In their seminal work, Miller and Modigliani (1961) show that, absent mark-imperfections, dividend policy should not affect shareholders' wealth. Contrary to this proposition, however, a number of recent empirical studies report a significant positive stock price reaction to corporate dividend announcements. Examples of such studies include Aharoney and Swary (1980), Asquith and Mullins (1983), and Brickley (1982). To account for the observed dividend announcement effect, Miller and Rock (1985) propose a modification to the Miller-Modigliani assumption that investors and managers possess the same information. Miller and Rock hypothesize that when managers know more than outside investors about the firm's current and future performance, dividends provide a vehicle for communicating management's superior information to the shareholders. In a world of rational expectations, the firm's dividend (or financing) announcements provide just enough pieces of the firm's sources and uses statements for the market to deduce the unobserved piece, to wit, the firm's current earnings. The market's estimate of current earnings contributes in turn to the estimate of the expected future earnings on which the firm's market value largely hinges. (p.1032) Ross (1977) and Bhattacharya (1979, 1980) also present asymmetric Information models in which dividends serve as signals of the firm's current and future expected performance. A number of researchers question the information signaling role of dividends. They suggest that cheaper and equally efficient alternatives exist for managers to communicate information to shareholders (for example, see Miller and Modigliani (1961), Pettit (1972), Black (1976), and Stern (1979)). About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.
Author: H. Kent Baker
Publisher: John Wiley & Sons
ISBN: 0470455802
Category : Business & Economics
Languages : en
Pages : 552
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Book Description
Dividends And Dividend Policy As part of the Robert W. Kolb Series in Finance, Dividends and Dividend Policy aims to be the essential guide to dividends and their impact on shareholder value. Issues concerning dividends and dividend policy have always posed challenges to both academics and professionals. While all the pieces to the dividend puzzle may not be in place yet, the information found here can help you gain a firm understanding of this dynamic discipline. Comprising twenty-eight chapters—contributed by both top academics and financial experts in the field—this well-rounded resource discusses everything from corporate dividend decisions to the role behavioral finance plays in dividend policy. Along the way, you'll gain valuable insights into the history, trends, and determinants of dividends and dividend policy, and discover the different approaches firms are taking when it comes to dividends. Whether you're a seasoned financial professional or just beginning your journey in the world of finance, having a firm understanding of the issues surrounding dividends and dividend policy is now more important than ever. With this book as your guide, you'll be prepared to make the most informed dividend-related decisions possible—even in the most challenging economic conditions. The Robert W. Kolb Series in Finance is an unparalleled source of information dedicated to the most important issues in modern finance. Each book focuses on a specific topic in the field of finance and contains contributed chapters from both respected academics and experienced financial professionals.
Author: Mukesh Bajaj
Publisher:
ISBN:
Category :
Languages : en
Pages : 44
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Book Description
Author: Edgar O. Edwards
Publisher: Univ of California Press
ISBN:
Category : Business cycle
Languages : en
Pages : 344
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Book Description
Author: Doron Nissim
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
We investigate the relation between dividend changes and future profitability, measured in terms of either future earnings or future abnormal earnings. Supporting quot;the information content of dividends hypothesis,quot; we find that dividend changes provide information about the level of profitability in subsequent years, incremental to market and accounting data. We also document that dividend changes are positively related to earnings changes in each of the two years after the dividend change.
Author: Bruce K. Billings
Publisher:
ISBN:
Category :
Languages : en
Pages : 32
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Book Description
We investigate (1) whether investors' earnings expectations include dividend information that is incremental to information in earnings components and (2) whether investors correctly weight the incremental information reflected in dividends. We find that both dividends and dividend changes are related to future earnings after controlling for earnings-component information, and that the market's earnings-expectation model reflects the incremental dividend information. However, we find that stock prices act as if investors overweight the incremental information in dividends and dividend changes in forming earnings expectations. Consequently, we find predictable future stock returns related to dividends and dividend changes after controlling for the relation between future returns and earnings components.
Author: Kirsten Ely
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This paper examines how analysts combine earnings and dividend information when they predict future earnings. Because both earnings and dividends are noisy indications of future earnings, we posit that analysts use the two corroboratively, to confirm the information reflected in each, and that analysts will substitute away from earnings when it is noisy and toward dividends. Using regressions of analysts' earnings forecast revisions on unexpected earnings, unexpected dividends, and five variables that reflect whether the signs of unexpected earnings and dividends confirm or contradict each other, we find evidence of both corroboration and substitution. Analysts' earnings forecast revisions are significantly related to the five corroborative variables, and this relation has statistically significant explanatory power beyond that in the magnitudes of unexpected earnings and unexpected dividends. Consistent with expectations, we find that the evidence of corroboration varies across the noisiness of earnings information; there is more evidence of corroboration when earnings are more variable. We also find evidence consistent with analysts substituting away from earnings, toward dividend information for firms with noisy earnings information (high variance). Overall, the results imply that analysts use earnings and dividends information interdependently, with some interdependency determined by the noisiness of earning announcements.
