Dividend Catering and the Information Content of Dividend Changes

• Main Authors: Lin,Hsiaofeng, 林筱鳳
• Other Authors: Liu,Y. Angela
• Format: Others
• Language: en_US
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/20381102170926349272

博士 === 國立中正大學 === 企業管理研究所 === 100 === This paper tests the catering-based signaling hypothesis of dividends using a dataset of dividend changes in the U.S. stock market from 1993 to 2006. The hypothesis argues that catering outweighs signaling when firms make their payout decisions. Specifically, the study tests the hypotheses that without catering incentives firms should signal their future profitability by changing cash dividends, and that with catering incentives firms should signal only when the market appreciates the dividend changes or they only cater to investors’ dividend demands without taking signaling into account. The study finds that the catering-based signaling effect of dividends is significant in the U.S. market as a whole. However, it is also found that the empirical results are not consistent through industries. In the sample of seven industries, the effect is only applicable to the electronics and service industries. The empirical evidence is not sufficient to conclude the support for the effect in the construction, food, chemistry, machinery, and metal industries.