Dividend reductions, the timing of dividend payments and information content

Balachandran, Balasingham and Krishnamurti, Chandrasekhar and Theobald, Michael and Vidanapathirana, Berty (2012) Dividend reductions, the timing of dividend payments and information content. Journal of Corporate Finance, 18 (5). pp. 1232-1247. ISSN 0929-1199


Australian companies pay dividends semi-annually with smaller 'interim' payments and larger 'final' payments. Interim dividends are declared and paid within a less full information environment than final dividends. We analyze the interactions between the timing of dividends and their information content, controlling for share repurchase and tax effects. Dividend reductions that are not associated with share repurchases are statistically significantly related to future abnormal earnings and provide strong support for the information content of dividend reductions. The percentage of dividend reduction is stronger for interim than for final dividend reductions. The market reaction is negatively related to the reduction in imputation tax credit and reacts more aggressively and negatively to interim as compared to final dividend reductions.

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Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Additional Information: Permanent restricted access to published version due to publisher copyright policy (Elsevier)
Faculty / Department / School: Historic - Faculty of Business and Law - School of Accounting, Economics and Finance
Date Deposited: 17 Sep 2012 11:12
Last Modified: 22 Jul 2014 02:59
Uncontrolled Keywords: Australia; dividend reductions; franked and unfranked; information content; interim and final; price reactions
Fields of Research : 15 Commerce, Management, Tourism and Services > 1501 Accounting, Auditing and Accountability > 150107 Taxation Accounting
15 Commerce, Management, Tourism and Services > 1502 Banking, Finance and Investment > 150205 Investment and Risk Management
14 Economics > 1402 Applied Economics > 140207 Financial Economics
Socio-Economic Objective: B Economic Development > 90 Commercial Services and Tourism > 9001 Financial Services > 900102 Investment Services (excl. Superannuation)
Identification Number or DOI: 10.1016/j.jcorpfin.2012.08.002
URI: http://eprints.usq.edu.au/id/eprint/21881

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