Do dividends matter more in declining markets?

Fuller, Kathleen P.; Goldstein, Michael A.

doi:10.1016/j.jcorpfin.2011.01.001

Cited by 83 publications

(76 citation statements)

References 69 publications

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“…Based on this research and a sample similar to the one taken by Asquitha and Mullins' (1983), Healy and Paelpu (1988) confirm results shown in Asquitha and Mullins (1983). Fuller and Goldstein (2004) made a research during economy rise and during economy decline. They stress that a signal that company is experiencing problems is company's dividend decrease during recession.…”

Section: Literature Reviewmentioning

confidence: 99%

Stock Price Reaction to Dividend Announcement in Croatia

Miletić¹

2011

Economic Research-Ekonomska Istraživanja

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Section: Literature Reviewmentioning

confidence: 99%

Stock Price Reaction to Dividend Announcement in Croatia

Miletić¹

2011

Economic Research-Ekonomska Istraživanja

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“…Dividends being desired for different states of the economy is not a unique contribution we make. Fuller and Goldstein (2011) show that dividends matter more in declining markets. Our model follows a similar argument.…”

Section: Introductionmentioning

confidence: 98%

Dividends as a Solution to Agency Cost and Opaqueness: Theory and Evidence

Morris¹,

Roseman²

2014

IJEF

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We develop a model that explains the use of dividends in continuous time as a means of reducing agency cost. Ideally firms are transparent and shareholders can costlessly monitor managers. However perfect transparency is not always possible. Managers of opaque firms are harder to monitor and are subject to greater agency costs than managers of firms that are transparent. Similar to previous models, dividends are a means of reducing agency cost by removing excess cash available to managers. Since shareholders can monitor firms that are transparent, dividends are only required for opaque firms. Dividend policy is reevaluated whenever shifts in opaqueness occur. This reevaluation provides a multiperiod explanation to dividends that is absent in prior literature. Our theory generates predictions that are tested and supported.

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“…This table shows that at the 1% level, the coefficient for DIV is significantly greater in declining market months (0.0076) than in advancing market months ( 0.0040). Fuller and Goldstein [13] documented that this result indicated that in declining markets, dividend-paying firms outperformed non-dividendpaying firms by approximately 1.2% each month more than in advancing months. Furthermore, they interpreted the results showing that investors valued dividend-paying firms more in declining markets than in advancing markets.…”

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confidence: 95%

“…A recent study by Fuller and Goldstein [13] noted the asymmetric price reactions, and they studied the role of dividends in declining markets. Table 2 is the result from Fuller and Goldstein [13], and they performed the following regression.…”

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confidence: 99%

“…where rit rFt is the return on a stock in month t minus the three-month Treasury-bill return for month t, is the firm's beta measured for the prior year for month t, Ln(Mktcap) is the natural log of the firm's market capitalization for month t, Ln(BVEquity) is the natural log of the firm's book value of equity for month t, and DIV is an indicator variable that equals one if the firm is classified as a dividendpaying firm in month t and zero if the firm is classified as a non-dividend-paying firm in month t. Fuller and Goldstein [13] note that the data are from CRSP and Compustat and the sample period is from January 1970 to December 2007. They define that advancing markets are when the S&P 500 index return is greater than zero and declining markets are when the S&P 500 index return is zero or less.…”

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confidence: 99%

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A Discussion on the Signaling Hypothesis of Dividend Policy

Tsuji¹

2012

TOBJ

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This paper discusses the signaling hypothesis of corporate dividend policy. We discuss this traditionally important matter in the field of corporate finance by introducing both classic and newest related studies. There seem to be some general agreements on the dividend-signaling hypothesis; however, our discussions include the following new viewpoints. First is the possibility of the firm risk changes after dividend policy changes. Second is the linkage between market efficiency and dividend policy. Third is the reality of dividend policy changes as signals by corporate managers. We consider that our many-sided discussions on the dividend-signaling hypothesis with reviewing both classic and newest literature contribute to theoretical and empirical future related research in this field.

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Do dividends matter more in declining markets?

Cited by 83 publications

References 69 publications

Stock Price Reaction to Dividend Announcement in Croatia

Stock Price Reaction to Dividend Announcement in Croatia

Dividends as a Solution to Agency Cost and Opaqueness: Theory and Evidence

A Discussion on the Signaling Hypothesis of Dividend Policy

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