The Information Content of Dividend and Capital Structure Policies
نویسندگان
چکیده
n Paul D. Koch is a Professor of Finance and Catherine Shenoy is an Assistant Professor of Business at the University of Kansas. We reexamine signaling and agency theories and argue that the free-cashflow hypothesis implies a stronger information effect for both overand underinvesting firms than for value-maximizing firms. Our results indicate that dividend and capital structure policies interact to provide significant predictive information about future cash flow. We also find a U-shaped relation between the amount of information and Tobin’s q. The minimum of this relation occurs near a q value of one. This outcome implies a stronger information effect for both overand underinvesting firms than for value-maximizing firms.
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