This study examines the impact of special dividend announcements in a partial imputation tax environment in the UK. We find that the market reaction is positive. The price reaction is negatively related with growth opportunities and positively related with pre-announcement cash flow and size of the special dividend. Abnormal future operating performance is positively related with growth opportunities for the year ended after the announcement and the year after, and is positively related with the size of the special dividend for the year ended after the announcement and insignificantly related thereafter. Overall, our findings support the conclusion that in a partial imputation tax environment, managers use special dividends both to signal future performance for firms with high growth opportunities and to reduce agency costs for firms with low growth opportunities.
{"title":"Do Special Dividends Convey Information?","authors":"B. Balachandran, M. Dempsey, M. Mahamuni","doi":"10.2139/ssrn.2564550","DOIUrl":"https://doi.org/10.2139/ssrn.2564550","url":null,"abstract":"This study examines the impact of special dividend announcements in a partial imputation tax environment in the UK. We find that the market reaction is positive. The price reaction is negatively related with growth opportunities and positively related with pre-announcement cash flow and size of the special dividend. Abnormal future operating performance is positively related with growth opportunities for the year ended after the announcement and the year after, and is positively related with the size of the special dividend for the year ended after the announcement and insignificantly related thereafter. Overall, our findings support the conclusion that in a partial imputation tax environment, managers use special dividends both to signal future performance for firms with high growth opportunities and to reduce agency costs for firms with low growth opportunities.","PeriodicalId":267900,"journal":{"name":"Earnings Quality","volume":"106 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-02-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116848504","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Our objective was to conduct an experimental study of investors’ reactions in terms of trading volume to the announcement of annual earnings. Shareholders consider annual net income as the most important figure in the announced results since it is the basis for determining profit for individual accounts at the shareholders’ general meeting. In our experiment, annual earnings are announced at the end of eight rounds of exchanges. Prior to the year end announcement, a fraction of the annual income is revealed to all of the participants at the end of every two periods. Participants thus periodically revise their expectations regarding annual results. The experiment shows that the heterogeneity of expectations does not decrease when investors have more information about the final results. This heterogeneity also is the main factor behind transactions in our experimental asset markets. However, too large a dispersion in expectations prevents investors from trading. Although price changes in absolute value influence trading volume as expected, the heterogeneity of expectations has a greater impact.
{"title":"Trading Volume, Heterogeneous Expectations and Earnings Announcements","authors":"T. Dinh, J. Gajewski","doi":"10.2139/ssrn.1466705","DOIUrl":"https://doi.org/10.2139/ssrn.1466705","url":null,"abstract":"Our objective was to conduct an experimental study of investors’ reactions in terms of trading volume to the announcement of annual earnings. Shareholders consider annual net income as the most important figure in the announced results since it is the basis for determining profit for individual accounts at the shareholders’ general meeting. In our experiment, annual earnings are announced at the end of eight rounds of exchanges. Prior to the year end announcement, a fraction of the annual income is revealed to all of the participants at the end of every two periods. Participants thus periodically revise their expectations regarding annual results. The experiment shows that the heterogeneity of expectations does not decrease when investors have more information about the final results. This heterogeneity also is the main factor behind transactions in our experimental asset markets. However, too large a dispersion in expectations prevents investors from trading. Although price changes in absolute value influence trading volume as expected, the heterogeneity of expectations has a greater impact.","PeriodicalId":267900,"journal":{"name":"Earnings Quality","volume":"17 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-09-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127209147","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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