Dividend tax signaling and the pricing of future earnings: a case of taxable stock dividends

Dividend tax signaling and the pricing of future earnings: a case of taxable stock dividends The purpose of our study is to explore what types of information content are conveyed by dividends on future earnings. We examine this issue by investigating the effect of dividends on the association between current year stock returns and future earnings (i.e. the future earnings response coefficient, FERC). Based on exploring the Taiwan market, our results reveal that taxable stock dividends enhance the FERC while nontaxable stock dividends do not, consistent with the tax-based signaling argument. We also find a positive relation between cash dividends and the FERC in firms with severe free cash flow problems, and this suggests that higher cash payouts mitigate manager over-investment so future earnings are more highly valued, consistent with the agency argument. Our main contributions are to specify what factors make dividends informative with regard to future earnings and the provision of evidence to support the tax-based signaling model. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Dividend tax signaling and the pricing of future earnings: a case of taxable stock dividends

Loading next page...
Springer US
Copyright © 2012 by Springer Science+Business Media, LLC
Economics / Management Science; Finance/Investment/Banking; Accounting/Auditing; Econometrics; Operations Research/Decision Theory
Publisher site
See Article on Publisher Site


You’re reading a free preview. Subscribe to read the entire article.

DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 12 million articles from more than
10,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Unlimited reading

Read as many articles as you need. Full articles with original layout, charts and figures. Read online, from anywhere.

Stay up to date

Keep up with your field with Personalized Recommendations and Follow Journals to get automatic updates.

Organize your research

It’s easy to organize your research with our built-in tools.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

Monthly Plan

  • Read unlimited articles
  • Personalized recommendations
  • No expiration
  • Print 20 pages per month
  • 20% off on PDF purchases
  • Organize your research
  • Get updates on your journals and topic searches


Start Free Trial

14-day Free Trial

Best Deal — 39% off

Annual Plan

  • All the features of the Professional Plan, but for 39% off!
  • Billed annually
  • No expiration
  • For the normal price of 10 articles elsewhere, you get one full year of unlimited access to articles.



billed annually
Start Free Trial

14-day Free Trial