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THE EFFECT OF INSTITUTIONAL INTEREST ON THE INFORMATION CONTENT OF DIVIDEND‐CHANGE ANNOUNCEMENTS
Author(s) -
Alangar Sadhana,
Bathala Chenchuramaiah T.,
Rao Ramesh P.
Publication year - 1999
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.1475-6803.1999.tb00704.x
Subject(s) - dividend , business , dividend policy , content (measure theory) , monetary economics , economics , finance , mathematics , mathematical analysis
We test the hypothesis that the information content of dividend‐change announcements, as reflected in stock prices, is directly related to the degree of pre‐announcement information asymmetry in the stock. The dividend‐change announcements include initiations, large increases, large decreases, and omissions. Information asymmetry is proxied by the proportion of stock held by institutions. Consistent with the hypothesis, we document a significantly positive relation between the absolute values of the announcement‐period excess returns and the degree of pre‐announcement information asymmetry in the stock. This finding appears to hold for all types of dividend changes except dividend omissions.