Dividend Policies in an Unregulated Market: The London Stock Exchange, 1895–1905

Braggion, Fabio; Moore, Lyndon

doi:10.1093/rfs/hhr026

Cited by 81 publications

(41 citation statements)

References 64 publications

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“…Using this methodology, the significance of the coefficient of dividend changes disappears, showing no support for the information content of dividends about earnings prospects. On the other hand, more recently, applying both Nissim and Ziv's linear and Grullon et al's nonlinear models to the dividend events of British firms between 1895 and 1905, Braggion and Moore (2011) find strong support for the information content of dividends under both models.…”

Section: Introductionmentioning

confidence: 97%

“…This causes them to positively (negatively) react to the dividend increases (decreases) but without contemplating that in addition to signaling, managers may change dividends for other reasons. Moreover, Watts (1973), Gonedes (1978), Penman (1983), DeAngelo et al(1996), Benartzi et al(1997), Nissim and Ziv (2001), Grullon et al (2002), Brav et al(2005), Grullon et al(2005), Denis and Osobov (2008), Braggion and Moore (2011), etc., directly examine whether dividend changes can predict subsequent accounting earnings changes instead of future stock returns. However, their results still cannot completely discern whether the relationship between dividend changes and subsequent earnings changes is due to signaling because managers may change dividends, for example, to retain more capital for future investments or disburse excess cash for which they have no better alternative use.…”

Section: Introductionmentioning

confidence: 99%

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Do firms use dividend changes to signal future profitability? A simultaneous equation analysis

Liu

Chen

2015

International Review of Financial Analysis

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Section: Introductionmentioning

confidence: 97%

Section: Introductionmentioning

confidence: 99%

Do firms use dividend changes to signal future profitability? A simultaneous equation analysis

Liu

Chen

2015

International Review of Financial Analysis

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“…For instance, it has been shown that dividend signaling is prevalent in countries like the U.K. (Braggion and Moore 2011) or informative with regard to current earnings in countries like Germany (Amihud and Murgia 1997). At the same time, the U.S. evidence on dividend signaling is rather mixed (e.g., DeAngelo, DeAngelo, and Skinner 2000;Nissim and Ziv 2001;Grullon, Michaely, and Swaminathan 2002), which might be due to the existence and popularity of less costly alternatives like share repurchases (Fama and French 2001).…”

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confidence: 99%

Dividend Payouts and Information Shocks

2013

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This paper examines changes in firms' dividend payouts following an exogenous shock to the information environment. Traditional signaling, agency, and voluntary disclosure models predict that the more is commonly known about a firm and its competitors in the marketplace, the less private information managers will have to reveal themselves via costly signals or cash disbursements. To test these predictions, we analyze the dividend payment behavior for a global sample of firms around the mandatory adoption of IFRS and around the initial enforcement of new insider trading laws. Both events have the potential to improve the general information environment in the economy. We find that following the two events firms are less likely to pay (or increase) cash dividends, but more likely to cut (or stop) such payments. The changes in dividend policy occur around the time of the informational shock and only in countries and for firms subject to the regulatory change. In further analyses we find that the information content of dividends, measured as threeday absolute announcement returns, is lower after the informational events. The findings underscore that firms' payout policies, among other things, depend on the extent of information about all firms in the economy. AbstractThis paper examines changes in firms' dividend payouts following an exogenous shock to the information environment. Traditional signaling, agency, and voluntary disclosure models predict that the more is commonly known about a firm and its competitors in the marketplace, the less private information managers will have to reveal themselves via costly signals or cash disbursements. To test these predictions, we analyze the dividend payment behavior for a global sample of firms around the mandatory adoption of IFRS and around the initial enforcement of new insider trading laws. Both events have the potential to improve the general information environment in the economy. We find that following the two events firms are less likely to pay (or increase) cash dividends, but more likely to cut (or stop) such payments. The changes in dividend policy occur around the time of the informational shock and only in countries and for firms subject to the regulatory change. In further analyses we find that the information content of dividends, measured as three-day absolute announcement returns, is lower after the informational events. The findings underscore that firms' payout policies, among other things, depend on the extent of information about all firms in the economy. JEL classification:G14, G15, G35, K22, M41 with the signal fall below the additional valuation premium from escaping the pooling equilibrium. If the firms' information environment improves, for instance, because firms are required to adopt a more transparent set of accounting standards or existing reporting and disclosure rules are more tightly enforced, outside investors should be better able to assess each individual firm's type a priori. As a result, the expected valuation premium for the ...

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“…This difference may arise because the zero-yielding stocks in the US dataset include many of those that distribute wealth to shareholders through stock repurchases, as well as those that have strong growth potential. In contrast, stock repurchases were not used in nineteenth-century Britain to return earnings to shareholders, and stocks that did not make dividend payments may have been more likely to be those that did not perform well (Braggion and Moore, 2011;Turner et al, 2013). From Panel B of Table 3, we can see that zero-yielding stocks, unlike those in the twentieth-century US market, did not enjoy high returns in our sample.…”

Section: <Insert Table 4>mentioning

confidence: 82%