Market response to dividend change announcements: unregulated versus regulated US firms

Abstract

This paper attempts to determine whether there is a significant difference in how the stock market responds to dividend change announcements of regulated (both utilities and financials) versus unregulated firms and, if so, which factors cause this difference. An analysis of dividend change announcements of US firms over the period 1962-2016 shows that the market response is larger for unregulated than for regulated firms, but this difference is statistically significant only for dividend increases (not for dividend decreases). Further, cross-sectional analysis indicates that, for dividend increases, the difference between regulated and unregulated firms increases with diffused ownership and informational asymmetry. When both these factors are controlled for, the difference between regulated and unregulated firms becomes statistically insignificant. Thus, the evidence suggests that the significant difference in market response to dividend increases of regulated versus unregulated firms can be explained by differences in diffused ownership and informational asymmetry. There seems to be no intrinsic difference between regulated and unregulated firms in the market response to dividend decreases.

Unintended benefits of mandatory dividend regulations on investment efficiency: evidence from China

“…Thus, SOEs shoulder the responsibility of executing the Party’s orders to ensure that the Party‐state’s political and social agendas can be realised. However, many of the agendas do not align with shareholder value maximisation (Chen et al ., 2017; Khokhar and Sarkar, 2020). Thus, the Party‐state’s intervention in the operations of SOEs has a negative impact on their investment efficiency.…”

Dividend reduction and stock price reaction in Indian market: is there a role of share repurchase?

“…Interestingly, Chapple et al (2020) find no abnormal stock price movement in the USA if the announcement is on Friday. Khokhar and Sarkar (2020) evince that the stock price reaction under dividend increase is evident in unregulated firms rather than the regulated ones.…”

Dividend announcements and stock returns: a retrospective analysis

“…Figure 4 presents the title word cloud for 102 articles published during 2002-2022 on emerging and developed markets. These articles revolve around examining the "announcement effects" (Rabbani, 2017) and "market response" or "market reaction" (McCluskey et al, 2006;Murado glu and Aydo gan, 2003;Tsai and Wu, 2015) to "information content" (Chen et al, 2002), "dividend announcements" "interim dividend announcements" (Nadig, 2017a), "dividend omission" (Caton et al, 2003), "dividend change" (Khokhar and Sarkar, 2020;Rabbani, 2017), "dividend initiation" (Dasilas et al, 2009;Q. E. Wang, 2020) The USA has the highest PageRank, followed by the UK and the UAE.…”

“…Figure 4 presents the title word cloud for 102 articles published during 2002–2022 on emerging and developed markets. These articles revolve around examining the “announcement effects” (Rabbani, 2017) and “market response” or “market reaction” (McCluskey et al , 2006; Muradoğlu and Aydoğan, 2003; Tsai and Wu, 2015) to “information content” (Chen et al , 2002), “dividend announcements” “interim dividend announcements” (Nadig, 2017a), “dividend omission” (Caton et al , 2003), “dividend change” (Khokhar and Sarkar, 2020; Rabbani, 2017), “dividend initiation” (Dasilas et al , 2009; Q. E. Wang, 2020) on “stock market” “share price” “stock return” in “China” (Dong et al , 2019; Yin and Nie, 2021), “India” (Anwar et al , 2016b; Kumar, 2017; Nadig, 2017a), “Nigeria” (Campbell and Ohuocha, 2011; Ozo and Arun, 2019), “Russia” (Berezinets et al , 2017, 2019), “Malaysia” (How and Tsen, 2019; Sulong and Yazid, 2012), “Taiwan” (Chen et al , 2014). The orientation of articles during 2002–2022 is on emerging markets.…”