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Signaling, Information Content, and the Reluctance to Cut Dividends

Published online by Cambridge University Press:  06 April 2009

Avner Kalay
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Extract

Managerial aversion to reduce dividends is not only an assertion to be found in the financial literature (see, for example, [2], [4], [8], [9]), but is also the basis for the informational content of dividends hypothesis (see [8]). Furthermore, its existence, if known to investors, can explain dividend payments which involve tax and transaction related costs. Surprisingly, the empirical evidence on this assertion is less than satisfactory. This study examines the existing empirical evidence on this assertion and points out its limitations. A new test, that can refute the informational content associated with the reluctance to cut dividends, is then performed.

Information

Type
Signaling
Information
Journal of Financial and Quantitative Analysis , Volume 15 , Issue 4 , November 1980 , pp. 855 - 869
Copyright
Copyright © School of Business Administration, University of Washington 1980

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References

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