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Title: Dividend changes and information transfer
Authors: Michelle Lynda Carvalho, Kuah Hwee Ling
Keywords: DRNTU::Business::Finance::Dividends
Issue Date: 1997
Abstract: A topic that has continuously aroused interest and controversy in corporate financial theory is the effect of dividend policy. Previous empirical research has established that dividend changes are associated with significant abnormal returns. This association is rationalised on that basis that dividend announcements acts as a signal of favourable future earnings. Another body of research established the existence of intra-industry transfers of information where news about one firm is extrapolated to other companies in the same industry. Earnings information transfer have been examined to be positive in nature where good news of a company leads to increase in stock price of rival companies. Linking the concepts of signaling effect and information transfer of dividend announcements, tests have been constructed to test whether the dividend announcements of one company will affect the stock performance of other firms in the same industry. Results from studies have shown that there is some small positive information transfer. However, the magnitude of information transfer do not solely depend on the degree of the dividend surprise. Other factors such as the recent dividend history of other companies, correlation of stock returns between dividend announcer and other companies also contribute to mitigate or magnify the effect.
Description: 121 p.
Rights: Nanyang Technological University
Fulltext Permission: restricted
Fulltext Availability: With Fulltext
Appears in Collections:NBS Student Reports (FYP/IA/PA/PI)

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