Does the Information Content of Payout Initiations and Omissions Influence Firm Risks?

30 Pages Posted: 7 Mar 2016 Last revised: 23 Jun 2016

See all articles by J. Henk von Eije

J. Henk von Eije

University of Groningen - Faculty of Economics and Business

Abhinav Goyal

University College Cork

Cal B. Muckley

University College Dublin

Date Written: March 3, 2016

Abstract

We study the influence on fi rm risks of NASDAQ and NYSE firm payout initiations and omissions. These pay out events can be interpreted as managerial signals of firm financial life-cycle maturation resulting in concomitant changes in firm risks. We remove confounding payout types and we match on the propensity to initiate or omit informed by determinants of pay out known to investors in advance. For payout event and matched firms, we apply the difference-in-differences method to estimate the effect of the information content of actual initiations and omissions on firm risks. We find consistent significant declines in total, aggregate systematic, and idiosyncratic firm risks after cash dividend initiations and increases after dividend omissions, but only incidentally after share repurchase initiations and omissions.

Keywords: dividends, repurchases, initiations, omissions, total risk, idiosyncratic risk, systematic firm risks, self-selection

JEL Classification: G35, G32, C58

Suggested Citation

von Eije, J. Henk and Goyal, Abhinav and Muckley, Cal B., Does the Information Content of Payout Initiations and Omissions Influence Firm Risks? (March 3, 2016). Journal of Econometrics, No. 183, 2014, 222-229, Available at SSRN: https://ssrn.com/abstract=2741643

J. Henk Von Eije (Contact Author)

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

Abhinav Goyal

University College Cork ( email )

O'Rahilly Building
College Road
Cork
Ireland
+353 (0)21 490 2839 (Phone)

Cal B. Muckley

University College Dublin ( email )

Blackrock, Co. Dublin
Ireland
+353-1-716-8091 (Phone)

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