Corporate Financial Policy, Information, and Market Expectations: An Empirical Investigation of Dividends

AHARON R. OFER*, DANIEL R. SIEGEL

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

105 Scopus citations

Abstract

This paper documents a relationship between announcements of unexpected changes in financial policy and unexpected changes in performance of the firm. Using a new methodology that combines analysis of stock price movements and earnings forecast data, the authors provide evidence that analysts revise their earnings forecasts following the announcement of an unexpected dividend change by an amount positively related to the size of the unexpected dividend change. They also provide evidence that these revisions are positively related to the change in equity value surrounding the announcement. Further, they find that these revisions are consistent with rationality. Their results therefore provide direct evidence consistent with the hypothesis that unexpected dividend changes signal information about firm performance to market participants. 1987 The American Finance Association

Original languageEnglish (US)
Pages (from-to)889-911
Number of pages23
JournalThe Journal of Finance
Volume42
Issue number4
DOIs
StatePublished - Jan 1 1987

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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