Does Dividend Policy Relate to Cross‐Sectional Variation in Information Asymmetry? Evidence from Returns to Insider Trades | Zendy

Khang Kenneth | Zendy; King TaoHsien Dolly | Zendy

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Does Dividend Policy Relate to Cross‐Sectional Variation in Information Asymmetry? Evidence from Returns to Insider Trades

Author(s) -

Khang Kenneth,

King TaoHsien Dolly

Publication year - 2006

Publication title -

financial management

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 1.647

H-Index - 68

eISSN - 1755-053X

pISSN - 0046-3892

DOI - 10.1111/j.1755-053x.2006.tb00160.x

Subject(s) - dividend , insider , information asymmetry , dividend policy , asymmetry , proxy (statistics) , economics , financial economics , insider trading , monetary economics , business , econometrics , finance , mathematics , statistics , physics , quantum mechanics , political science , law

We examine the relation between dividends and information asymmetry by using insider returns as a proxy for information asymmetry. We find that dividends are negatively related to returns to insider trades across firms. Firms that pay consistently high dividends have lower insider returns than do firms that pay consistently low dividends. These results do not support traditional dividend signaling models. Rather, they are consistent with the proposition that firms with the highest dividends have the lowest levels of information asymmetry.

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