Information effects of dividends: Evidence from the Hong Kong market

Information effects of dividends: Evidence from the Hong Kong market The literature has suggested that earnings and earnings forecasts provide stronger signals than dividends about future performance of a firm. We test the information effects of simultaneous announcement of earnings and dividends in the Hong Kong market, distinguished by three interesting features (concentrated family-shareholdings, low corporate transparency, and no tax on dividends). Our results show significant share price reactions to unexpected earnings and dividend changes, but dividends appear to play a dominant role over earnings in pricing, a result contrary to findings in the literature. The signaling hypothesis works primarily for firms with earning increases, while the maturity hypothesis works mainly for firms with earnings declines. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Information effects of dividends: Evidence from the Hong Kong market

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Publisher
Kluwer Academic Publishers-Plenum Publishers
Copyright
Copyright © 2006 by Springer Science+Business Media, LLC
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-006-0002-y
Publisher site
See Article on Publisher Site

Abstract

The literature has suggested that earnings and earnings forecasts provide stronger signals than dividends about future performance of a firm. We test the information effects of simultaneous announcement of earnings and dividends in the Hong Kong market, distinguished by three interesting features (concentrated family-shareholdings, low corporate transparency, and no tax on dividends). Our results show significant share price reactions to unexpected earnings and dividend changes, but dividends appear to play a dominant role over earnings in pricing, a result contrary to findings in the literature. The signaling hypothesis works primarily for firms with earning increases, while the maturity hypothesis works mainly for firms with earnings declines.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Oct 24, 2006

References

  • Trading behavior and the unbiasedness of the market reaction to dividend announcement
    Bajaj, M; Vijh, AM
  • Detecting long-run abnormal stock returns: The empirical power and specification of test statistics
    Barber, BM; Lyon, JD

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