Attention to dividends, inattention to earnings?

Abstract We examine whether dividends serve as substitutes or complements to accounting information in firm valuation. Consistent with substituting for earnings information, we find that dividend paying firms have 11%–15% lower response coefficients (ERCs) than non-payers. more substitution when the provides a stronger signal of permanent earnings: is less likely cut dividend, fund out rather cash reserves, larger. then show payers absolute returns, trading volume, and fewer analyst forecasts at announcement (EA), suggesting attract attention their informative EAs. Finally, EA translates into management earnings-related disclosures relative Collectively, this evidence suggests supply about and, although costly, could be an efficient way some satisfy investors’ demand information.