Title: | The Declining Information Content of Dividend Announcements and the Effects of Institutional Holdings |
Authors: | Amihud, Yakov Li, Kefei |
Issue Date: | May-2005 |
Series/Report no.: | FIN-02-061 |
Abstract: | We propose an explanation for the “disappearing dividend” phenomenon: a decline in the information content of dividend announcements, which reduces the propensity of firms to use dividends as a costly signal. A reason for a decline in the information content of dividends is the rise in holdings by institutional investors that are more sophisticated and informed. We indeed find a decline in CAR at dividend change announcements since the mid 1970s. Across firms, CAR is a decreasing function of institutional holdings. Institutional investors exploit their superior information and buy before dividend increases. And, dividends are less likely to rise in firms with high institutional holdings. |
URI: | http://hdl.handle.net/2451/26505 |
Appears in Collections: | Finance Working Papers |
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