Stock Price Adjustment to the Information in Dividend Changes

Stock Price Adjustment to the Information in Dividend Changes This paper examines abnormal stock returns in the three years surrounding relatively large changes in dividends announced during the 1971 to 1990 period. The main results are that statistically and economically significant negative post-announcement abnormal returns of 11% and 17% over the post-announcement year are found for firms which decrease dividends and those which omit their dividends. Firms resuming and firms increasing dividends do not exhibit significant abnormal returns, on average, over the post-announcement year. The pattern of lagged price adjustment to negative dividend change information differs from that reported for 'earnings surprise' firms in important respects. While the dividend change firms do exhibit returns behavior consistent with year-to-year returns momentum, differences in prior year returns do not explain the differences in returns over the post-announcement period. Review of Quantitative Finance and Accounting Springer Journals

Stock Price Adjustment to the Information in Dividend Changes

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Kluwer Academic Publishers
Copyright © 1999 by 1999 Kluwer Academic Publishers, Boston. Manufactured in The Netherlands.
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
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