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The Market’s Perception of the Information Conveyed by Dividend Announcements

Author
Canina, Linda
Abstract
This paper tests whether the market perceives announced dividend changes to reflect information about current and/or future cash flows. The empirical relationship between dividend changes and earnings changes is inconclusive. Furthermore, there is no empirical evidence regarding the market’s perception of managers’ intentions in changing the level of dividends. By analyzing the price reaction of scores to an announced dividend change, we are able to isolate the effects of a short-term change and a long-term change. Our findings indicate that the market perceives dividend changes to reflect a long-term change in earnings.
Date Issued
1999-01-01Subject
dividend announcements; earnings changes
Related DOI:
https://doi.org/10.1016/S1042-444X(98)00049-8Rights
Required Publisher Statement: © Elsevier. Final version published as: Canina, L. (1999). The market’s perception of the information conveyed by dividend announcements. Journal of Multinational Financial Management, 9(1), 1-13. doi: 10.1016/S1042-444X(98)00049-8 Reprinted with permission. All rights reserved.
Type
article