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Earnings and Dividend Announcements: Is There a Corroboration Effect?
Author(s) -
KANE ALEX,
LEE YOUNG KI,
MARCUS ALAN
Publication year - 1984
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1984.tb03894.x
Subject(s) - earnings , credence , dividend , economics , stock (firearms) , financial economics , monetary economics , econometrics , accounting , finance , mathematics , statistics , mechanical engineering , engineering
We examine abnormal stock returns surrounding contemporaneous earnings and dividend announcements in order to determine whether investors evaluate the two announcements in relation to each other. We find that there is a statistically significant interaction effect. The abnormal return corresponding to any earnings or dividend announcement depends upon the value of the other announcement. This evidence suggests the existence of a corroborative relationship between the two announcements. Investors give more credence to unanticipated dividend increases or decreases when earnings are also above or below expectations, and vice versa.