Are all dividends created equal? Australian evidence using dividend‐increase track records

Recent research indicates that the signal sent by a dividend change is more powerful for longer histories of unchanged dividends. We study the dividend history of Australian firms to investigate whether the signalling power of a dividend increase varies with the frequency of repetition. We find that the first three consecutive dividend increases are associated with significantly positive abnormal returns, and subsequent increases are generally not significant, even after controlling for the interaction effect with the simultaneously announced earnings information. Our results support the hypothesis that repeating a dividend increase eventually leads to a reputation for further increases and weakens the value of subsequent increases as a means of disseminating management's private information.