Dividend reductions, the timing of dividend payments and information content

Bala Balachandran, Chandrasekhar Krishnamurti, Michael Francis Theobald, Berty Vidanapathirana

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    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.
    Original languageEnglish
    Pages (from-to)1232 - 1247
    Number of pages16
    JournalJournal of Corporate Finance
    Issue number5
    Publication statusPublished - 2012

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