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AN EMPIRICAL INVESTIGATION OF STOCK DIVIDENDS‐IN‐KIND
Author(s) -
Fields L. Paige,
Wilkins Michael S.
Publication year - 1996
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1996.tb00587.x
Subject(s) - dividend , share price , business , stock (firearms) , accounts payable , monetary economics , stock price , financial economics , dividend policy , common stock , economics , finance , stock exchange , payment , mechanical engineering , paleontology , context (archaeology) , series (stratigraphy) , engineering , biology
We investigate share price reactions to announcements of dividends payable in the common stock of corporations different from the issuing firm. We find that firms that declare these dividends (typically investment companies) experience positive abnormal returns upon announcement. We also find that such dividends are more likely to be declared when the shares to be distributed have peaked in value. Consistent with this finding, we document negative announcement‐period abnormal returns for firms having their shares distributed. Additional tests reveal that prices respond more negatively when the information signal is strongest, when outside ownership is more dispersed, and when management is more entrenched.