Institutional Affiliation: Univeristy of Toronto
NBER Working Papers and Publications
|June 1994||Price Reactions to Dividend Initiations and Omissions: Overreaction or Drift?|
with Roni Michaely, Richard H. Thaler: w4778
Initiations and omissions of dividend payments are important changes in corporate financial policy. This paper investigates the market reaction to such changes in terms of prices, volume, and changes in clientele. Consistent with the prior literature we find that short run price reactions to omissions are greater than for initiations (-7.0% vs. +3.4% three day return). However, we show that, when we control for the change in the magnitude of dividend yield (which is larger for omissions), the asymmetry shrinks or disappears, depending on the specification. In the 12 months after the announcement (excluding the event calendar month), there is a significant positive market-adjusted return for firms initiating dividends of +7.5% and a significant negative market-adjusted return for firms ...
Published: Journal of Finance, June 1995. citation courtesy of