Information Content of Dividend Resumptions
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Authors
Zwirlein, Thomas J.
Weigand, Robert A.
Gorman, Larry R.
Issue Date
2005-07-1
Type
Working paper
Language
en_US
Keywords
Dividends , Profits , Risk , Earnings
Alternative Title
Abstract
We investigate the empirical characteristics of firms resuming cash dividends to determine if dividend resumption is most like dividend initiation, a large dividend increase, or a completely unique event. Firms that resume dividends earn considerably larger returns than firms initiating or increasing dividends, both before and after the announcement. Dividend-resuming firms exhibit changes in profits similar to firms increasing dividends, but the risk change following dividend resumption is more like that reported by studies of dividend initiation. These findings are unaffected by the length of time it takes firms to resume paying cash dividends, or whether the firm also declares a stock split and/or stock dividend during the period surrounding the resumption announcement. We conclude that dividend resumption is sufficiently unlike other dividend events to be regarded and studied as its own unique event.
Description
Citation
Publisher
Washburn University. School of Business