Signalling with Dividends? New Evidence from Europe

49 Pages Posted: 4 Aug 2007

See all articles by Elisabete Simões Vieira

Elisabete Simões Vieira

Instituto Superior de Contabilidade e Administracao da Universidade de Aveiro (ISCA-UA)

Clara C. Raposo

ISEG Lisbon School of Economics & Management

Date Written: August 2007

Abstract

According to the dividend signalling hypothesis, dividend change announcements trigger share returns because they convey information about management's assessment on firms' future prospects.

We analyse the classical assumptions of the dividend signalling hypothesis, using data from three European countries. The evidence gives no support to a positive relation between dividend change announcements and the market reaction for French firms, and only weak support for the Portuguese and UK firms. After accounting for non-linearity in the mean reversion process, the global results do not give support to the assumption that dividend change announcements are positively related with future earnings changes.

We also formulate two hypotheses in order to explore the window dressing phenomenon and the maturity hypothesis, finding some evidence in favour of both, especially in the UK market.

Keywords: Cash Dividends, Maturity Hypothesis, Signalling Hypothesis

JEL Classification: G35, G32

Suggested Citation

Vieira, Elisabete Fátima Simões and Raposo, Clara C., Signalling with Dividends? New Evidence from Europe (August 2007). Available at SSRN: https://ssrn.com/abstract=1004523 or http://dx.doi.org/10.2139/ssrn.1004523

Elisabete Fátima Simões Vieira (Contact Author)

Instituto Superior de Contabilidade e Administracao da Universidade de Aveiro (ISCA-UA) ( email )

Aveiro
Portugal

Clara C. Raposo

ISEG Lisbon School of Economics & Management ( email )

Rua do Quelhas 6
LISBOA, 1200-781
Portugal

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
352
Abstract Views
2,111
rank
106,570
PlumX Metrics