Dividend Announcements under Asymmetric Information: An Empirical Study

Previous empirical studies have documented that equity prices react to announcements of unexpected dividend changes. The most promising hypothesis forwarded as an explanation of this phenomenon is the dividend signalling hypothesis. Building on a foundation of dividend signalling models, this study employs an expanded set of explanatory variables to explain excess returns documented around dividend announcements. This set includes variables found in previous studies to have an impact on excess returns around dividend announcements, as well as other variables considered by some to be important (but previously untested) determinants of equity price movements.