The Relation among Firm Quality, Dividend, and Financing Policy

• Main Authors: Chung-wei Chan, 詹忠衛
• Other Authors: Chin-Chen Chien
• Format: Others
• Language: zh-TW
• Published: 2002
• Online Access: http://ndltd.ncl.edu.tw/handle/82849470755155558928

碩士 === 國立成功大學 === 財務金融研究所 === 90 === This paper investigates how dividend and debt can be employed to signal firm’s quality. Our analyses indicate that: (1) financing strategy is a necessary but not sufficient condition for signaling purposes; (2) dividend policy is a sufficient condition for firms that haven’t been forced to raise debt to signal their quality; and (3) firms would employ dividend as a supplemental signaling device when the marginal signaling effect of debt starts to decline. Empirical results indicate that firm’s quality cannot be distinguished by debt only because firms with financial distress have been forced to raise their debts involuntarily. Firms that are not faced with financial distress would take the action of reducing debts and paying dividends, both activities cannot be imitated by financial distressing firms. Non-financial distressing firms would employ dividend as a complemental signaling device once the level of debt reaches certain point and the marginal information effect of debt starts to decline.