A study on relationship between dividend changes with future profitability

Ghodrati, Hassan; Hashemi, Abbas

doi:10.5267/j.msl.2014.3.004

Cited by 4 publications

(3 citation statements)

References 10 publications

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“…The analyzes conducted by Ghodrati and Hashemi (2014) for companies from Iran show in turn that the impact of the increase in dividends on the future profitability of companies measured by ROE is positive in the next three years (+1, +2, +3) but statistically significant only in the first year. However, in the case of dividend reductions, the authors do not confirm the existence of specific links between ROE and dividend changes.…”

Section: Informational Content Of Dividends In the Polish Capital Marketmentioning

confidence: 99%

Are Emerging Markets Efficient? Evidence from Informational Content of Dividend Changes in Polish Stock Market

Snarska¹,

Tomasz²,

Zyguła³

2020

ERSJ

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Purpose: The objective of this paper is to present the dividend signaling hypothesis, in particular, an empirical analysis of the relationship between the current changes in the level of a dividend paid (t0) and the future profitability of the companies. Design/Methodology/Approach: The dividend signaling hypothesis is empirically tested using the dynamic causality analysis based on the regression approach monitoring for expected earnings changes and past returns with a set of linear and non-linear controls. The conducted analyses comprised the domestic companies quoted on the Warsaw Stock Exchange, which paid dividends in 2001-2016. Findings: The empirical results confirm that in the audited period, dividend decisions bring some information about the current situation (t = 0) and future (t = 1, t = 2) of the analyzed companies. It is also worth noting that among the analyzed indicators, the gross profit ratio (PBT) referred either to the market value or the book value of equity was most often in the statistically significant analyzes. In general, our results confirm the validity of the signaling hypothesis in the case of continuation-growth and initiation of payments in the Polish capital market as in the developed market. Practical Implications: We can say that investors, based on "signals" coming out of dividends advertisements, may conclude the future-income potential of a given company. Originality/value: As mentioned, the gross profit ratio (PBT) referred either to the market value or the book value of equity was most often in the statistically significant analyses. Thus, it seems that, contrary to the adopted assumptions in the literature, gross profit (PBT) in dividend signaling is more important than net profit (E).

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Section: Informational Content Of Dividends In the Polish Capital Marketmentioning

confidence: 99%

Are Emerging Markets Efficient? Evidence from Informational Content of Dividend Changes in Polish Stock Market

Snarska¹,

Tomasz²,

Zyguła³

2020

ERSJ

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“…In particular, S. P. Lee, M. Isa and W. L. Lim (2012) for the Malaysian stock market found that changes in dividends (increase / decrease) must be significant (by 50% or more) to bring a specific EPS signal, though the range of this signal was limited to the first year after the change. Analyses by H. Ghodrati and A. Hashemi (2014) conducted for companies in Iran, showed that the impact of the dividend growth on the future profitability (ROE) was positive in the next three years but statistically significant only in the first year. For reduced dividends, the authors did not confirm the signaling hypothesis.…”

Section: Current Dividends and Future Profits -A Review Of The Literamentioning

confidence: 99%

Changes in a Company’s Current Dividend Level and Their Impact on Future Profits – Theory and Practice

Zyguła

2017

Zesz. Nauk. UEK

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According to the signalling theory, investors draw conclusions concerning the future income potential of a given company based on the dividends it pays. According to one of the implications of this theory, changes made to a dividend should mirror the direction of future profits. This article presents an empirical analysis of the relationship between the current changes in the level of a dividend paid (t 0) and future company profitability (t + 1, t + 2). The companies examined were all traded on the Warsaw Stock Exchange and paid dividends in the years 2001-2013. The research shows that there is no statistically significant relationship between the dividend paid in a given year and the future results obtained by the companies examined.

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“…In particular, the results of the studies by Lee and others (2012), conducted on the stock market in Malaysia indicated that the changes in dividends (an increase/a decrease) must be of a substantial size (by 50% or more) to carry a specific signal about the future profits (the EPS was used as a measure of profit), although the scope of this signal was limited to only one year after the changes. In turn, analyses of Ghodrati and Hashemi (2014), conducted for the companies from Iran, showed that an impact of a dividend increase on the future profitability of the companies (the ROE was used as a measure of profit) was positive in the next three years (+1, +2, +3) but statistically significant only in the first year. However, in the case of a dividend reduction, the authors did not confirm the occurrence of dependences relevant to the signalling hypothesis.…”

Section: The Current Changes In a Dividend Level And The Future Resulmentioning

confidence: 99%

The signalling effect – changes in the current dividend policy and the future results of the companies – theory and practice

Zyguła

2017

Zeszyty Naukowe Uniwersytetu Szczecińskiego Finanse Rynki Finansowe Ubezpieczenia

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Purpose -The purpose of this article is to present the signalling effect, in particular, to introduce its theoretical foundations and to review major empirical studies on this effect. Design/methodology/approach -The literature review enabling to identify and discuss the main theoretical and empirical works regarding the signalling effect. Findings -The conducted study of the literature on the signalling effect leads to a conclusion that although researchers generally agree that dividend payments give some information, there is no consensus on what they really signal. Originality/value -Dividend theories described in the Polish literature are most often discussed in a collective way. By focusing on only one dividend policy aspect, i.e. the signalling effect, the article offers a more in-depth and comprehensive view of the presented issue.

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A study on relationship between dividend changes with future profitability

Cited by 4 publications

References 10 publications

Are Emerging Markets Efficient? Evidence from Informational Content of Dividend Changes in Polish Stock Market

Are Emerging Markets Efficient? Evidence from Informational Content of Dividend Changes in Polish Stock Market

Changes in a Company’s Current Dividend Level and Their Impact on Future Profits – Theory and Practice

The signalling effect – changes in the current dividend policy and the future results of the companies – theory and practice

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