Insider Trading around Dividend Announcements: Theory and Evidence

John, Kose; Lang, Larry H.P.

doi:10.2307/2328862

Cited by 92 publications

(47 citation statements)

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“…The positive announcement effect of dividend initiations and dividend increases has been documented by Asquith and Mullins (1983), which they suggest is due to the signaling role of dividends. John and Lang (1991) study insider trading around initiations and show that the announcement effect is higher when insiders buy stock prior to the event. Healy and Palepu (1988) study firm performance around initiations and omissions and find that initiations signal improved performance in the future.…”

Section: Related Literaturementioning

confidence: 99%

On the Timing of Dividend Initiations

Bulan¹,

Subramanian²,

Tanlu

2005

SSRN Journal

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Section: Related Literaturementioning

confidence: 99%

On the Timing of Dividend Initiations

Bulan¹,

Subramanian²,

Tanlu

2005

SSRN Journal

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“…Second, one reason why the insiders can capture only part of the gap between the pretrading value and the final value of the firm is that, as the insiders trade more shares, their information will be increasingly reflected in the market price. We assume that the managers trade anonymously; if they do not, then their position could be used to convey their private information (see also John and Lang (1991)). …”

Section: A the Managerial Labor Market Constraintmentioning

confidence: 99%

Insider Trading and the Managerial Choice among Risky Projects

Bebchuk¹,

Fershtman²

1994

The Journal of Financial and Quantitative Analysis

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The concern of this paper is with the effects of insider trading on ex ante managerial behavior. Specifically, the paper focuses on how insider trading affects insiders' choice among investment projects. Other things equal, insider trading leads insiders to choose riskier investment projects, because increased volatility of results enables insiders to make greater trading profits if they learn these results in advance of the market. This effect might be beneficial, however, because insiders' risk aversion pulls them toward a conservative investment policy. Insiders' choices of projects are identified and compared with insider trading and those without such trading. Using these results, the conditions under which insider trading increases or decreases corporate value by affecting the choice of projects with uncertain returns are identified.

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“…Watts (1973) finds weak evidence of a relationship between current dividends and future earnings. John and Lang (1991) examine the direction of insider trading around dividend changes and document evidence in favor of this theory. Healy and Palepu (1988) provide evidence that firms that initiate dividends are supportive of the dividend signaling theory but those that omit dividends are not.…”

Section: Prior Researchmentioning

confidence: 99%

Dividend Policy Responses to Deregulation in the Electric Utility Industry

D'Souza¹,

Jacob²,

Willis³

2015

IJBA

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This paper investigates changes in electric utilities' dividend policies following the onset of deregulation. Consistent with the theory of dividend clienteles, we find that utilities continue to pay high dividends after the onset of deregulation. Under a regulated regime, we find no systematic pattern of associations between dividend changes and abnormal stock returns or future earnings changes. Post-deregulation, however, we find that, consistent with prior research on unregulated firms, dividend increases (decreases) are viewed by the market as good (bad) news. When we examine earnings following changes in dividends, we do not find evidence in favor of the dividend signaling theory.

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Insider Trading around Dividend Announcements: Theory and Evidence

Cited by 92 publications

References 0 publications

On the Timing of Dividend Initiations

On the Timing of Dividend Initiations

Insider Trading and the Managerial Choice among Risky Projects

Dividend Policy Responses to Deregulation in the Electric Utility Industry

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