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A Note on the Stock Market Reaction to Dividend Announcements
Author(s) -
Impson C. Michael,
Karafiath Imre
Publication year - 1992
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.1992.tb01317.x
Subject(s) - dividend payout ratio , dividend , dividend yield , earnings , econometrics , economics , stock (firearms) , dividend policy , monetary economics , financial economics , accounting , finance , materials science , metallurgy
In this paper, we examine the stock market reaction to dividend announcements. A sample of dividend increases and decreases is partitioned by payout ratio increases and decreases. Previous research has examined the differential reaction to payout ratio increases and decreases only for dividend increases. In addition to an event study, cross‐sectional regressions are estimated using the percent changes in payout ratio and dividend to explain abnormal returns. We conclude that payout ratio changes appear to be only an artifact of an earnings stream that is more variable than the dividend stream, rather than revealing any significant shifts in managerial policy.