Dividend Announcements Reconsidered: Dividend Changes versus Dividend Surprises

Andrés, Christian; Betzer, André; Bongard, Inga van den; Haesner, Christian; Theissen, Erik

doi:10.2139/ssrn.1763201

Cited by 6 publications

(12 citation statements)

References 56 publications

(17 reference statements)

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“…Third, our results help explain why some studies (e.g., Lang and Litzenberger, 1989;Benartzi et al, 1997;Conroy et al, 2000;Fukuda, 2000;Abeyratna and Power, 2002;Andres et al, 2013) find weak or no support for the dividend signaling hypothesis when dividend news are measured by the time-series of dividend payments. First, our results suggest that investors form dividend expectations based on analyst forecasts, not random-walk forecasts.…”

Section: Introductionsupporting

confidence: 57%

“…3 To make cross-country comparisons meaningful, we focus on annualized analyst dividend forecasts because (1) most firms in Europe pay annual dividends (Ferris et al, 2010), (2) the majority of previous studies examine annual dividend 1 We use the terms "surprise" and "news" interchangeably to denote new information revealed at dividend or earnings announcements. 2 Past studies frequently find no support for the dividend signaling model when dividend expectations are based on time-series forecasts (e.g., Lang and Litzenberger, 1989;Benartzi et al, 1997;Conroy et al, 2000;Fukuda, 2000;Abeyratna and Power, 2002;Andres et al, 2013). In contrast, when expectations are based on analyst dividend forecasts, Andres et al (2013) and Bilinski and Bradshaw (2016) find support for the signaling role of dividends.…”

Section: Introductionmentioning

confidence: 99%

“…2 Past studies frequently find no support for the dividend signaling model when dividend expectations are based on time-series forecasts (e.g., Lang and Litzenberger, 1989;Benartzi et al, 1997;Conroy et al, 2000;Fukuda, 2000;Abeyratna and Power, 2002;Andres et al, 2013). In contrast, when expectations are based on analyst dividend forecasts, Andres et al (2013) and Bilinski and Bradshaw (2016) find support for the signaling role of dividends. 3 Few firms in the U.S. pay dividends, and the number of U.S. dividend payers has significantly declined over time (Fama and French, 2001;DeAngelo et al, 2004DeAngelo et al, , 2008.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Dividend guidance to manage analyst dividend expectations

Bilinski

Lyssimachou

2018

International Review of Financial Analysis

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Using a sample of dividend payers from 12 European countries, we document that managers guide analyst dividend expectations to avoid reporting dividends below the consensus forecast. Specifically, we show that dividend guidance predicts (1) a substantial reduction in analyst dividend forecast optimism over the course of the fiscal year and (2) that a firm will meet or beat the consensus dividend forecast by a small margin. Managers guide analyst dividend expectations to avoid negative price reactions when reporting negative dividend surprises. Our results, which are robust to endogeneity and self-selection concerns and control for contemporaneous earnings guidance, highlight the important role dividend guidance plays in managing analyst dividend expectations.

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Section: Introductionsupporting

confidence: 57%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Dividend guidance to manage analyst dividend expectations

Bilinski

Lyssimachou

2018

International Review of Financial Analysis

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“…Our results do not demonstrate that dividends are never value relevant. Indeed recent German evidence derived from a short window event study of dividend surprise suggests that dividends may convey price relevant information (Andres et al, ). Furthermore both Pope and Wang () and Clubb () suggest that accounting conservatism may drive a positive coefficient on dividends and taxation, agency and signalling explanations for dividend value relevance have been often postulated (Clubb and Walker, ).…”

Section: Resultsmentioning

confidence: 99%

Dividend Irrelevance and Accounting Models of Value

Rees¹,

Valentincic

2013

Business Fin & Account

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Abstract:In accounting models of value, dividends typically appear to have a strong positive relationship with value despite theoretical reasons to expect dividend displacement. We show that this result is driven by the relationship between dividends and both core earnings and other information derived from the valuation error in the prior year. Where core earnings can be effectively modelled in a specification including other information, dividend displacement is no longer rejected. Under these circumstances dividends exhibit weak incremental predictive power for earnings and earnings expectations and hence have little impact on value. We show that valuation models are sensitive to model specification and should be used with caution when testing the value impact of firm characteristics or accounting numbers.

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“…If, instead, epe does not exist, one will need the current dividend to predict future earnings. Hence, the current dividend will have a valuation coefficient different from –1; empirical studies generally confirm this (e.g., Rees, ; Andres et al, ; Rees and Valentincic, )…”

Section: An Ideal Construct Of Earningsmentioning

confidence: 93%

Dividend Policy Irrelevancy and the Construct of Earnings

Gao

Ohlson

Ostaszewski

2013

Business Fin & Account

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In a neo-classical setting of equity-valuation, this paper develops a principle of dividend policy irrelevancy (DPI) to identify and exploit characteristics of earnings. The latter refers to the idea that a value-relevant variable can not reasonably be labeled "earnings" unless it satisfies certain analytical properties with intuitive appeal. The paper proceeds in two parts. The first part, which culminates in Proposition I, provides necessary and sufficient conditions for DPI. The second part concerns how DPI predicates constructs of earnings and their analytical properties. A key result, Proposition II, shows that one can use the analytical properties of earnings to deduce the core approach in practical equity-valuation, namely, measures of growth in expected earnings explain the price to forward-earnings ratio. Abstract

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Dividend Announcements Reconsidered: Dividend Changes versus Dividend Surprises

Cited by 6 publications

References 56 publications

Dividend guidance to manage analyst dividend expectations

Dividend guidance to manage analyst dividend expectations

Dividend Irrelevance and Accounting Models of Value

Dividend Policy Irrelevancy and the Construct of Earnings

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