Discussion of Reactions to Dividend Changes Conditional on Earnings Quality
Abstract
The article examines the price implications of corporate disclosures as well as other information releases. Corporate disclosures are an important source of information for investors. For dividend announcements, the price implications appear straightforward: price is the present value of expected future dividends. Hence, to the extent that future dividends are related to current dividends, dividend changes should trigger price responses. Other corporate disclosures, such as earnings, may also be viewed as proxies for future dividends. So, it is implied that the price reaction to a particular disclosure should increase in the difference between the implied equity value based on that disclosure and price prior to the disclosure. The magnitude of price reaction should also increase in the precision of the disclosure and decrease in the precision of all prior price-related information. However, most empirical studies do not explicitly account for this effect.
Download PDF
Citation
Nissim, Doron. "Discussion—Reactions to Dividend Changes Conditional on Earnings Quality." Journal of Accounting, Auditing, and Finance 18, no. 1 (Winter 2003): 153-61.
Each author name for a Columbia Business School faculty member is linked to a faculty research page, which lists additional publications by that faculty member.
Each topic is linked to an index of publications on that topic.