Earnings Information Conveyed by Dividend Initiations and Omissions
نویسندگان
چکیده
This paper examines earnings changes surrounding firms' decisions to initiate or omit dividend payments. Firms that initiate (omit) dividend payments have positive (negative) earnings changes both before and after the dividend policy change. The subsequent earnings changes arc positively related to the dividend announcement return. Also, the stock price reactions at the announcement of subsequent earnings arc smaller than usual. These results suggest that: (1) dividend initiation/omission decisions reflect both past and future earnings performance; and (2) the market interprets the announcement of these decisions as managers' forecasts of future
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