Corporate Risk Management and Dividend Signaling Theory

Georges Dionne () and Karima Ouederni

Cahiers de recherche from CIRPEE

Abstract: This paper investigates the effect of corporate risk management on dividend policy. We extend the signaling framework of Bhattacharya (1979) by including the possibility of hedging the future cash flow. We find that the higher the hedging level, the lower the incremental dividend. This result is in line with the purpoted positive relation between information asymmetry and dividend policy (e.g., Miller and Rock, 1985) and the assertion that risk management alleviates the information asymmetry problem (e.g., DaDalt et al., 2002). Our theoretical model has testable implications.

Keywords: Signaling theory; Dividend policy; Risk management policy; Corporate hedging; Information asymmetry (search for similar items in EconPapers)
JEL-codes: D82 G32 G35 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-cta and nep-rmg
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Corporate risk management and dividend signaling theory (2011)
Working Paper: Corporate risk management and dividend signaling theory (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:lvl:lacicr:1008

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