Revisiting the corroboration effects of earnings and dividend announcements

Louis T. W. Cheng and T. Y. Leung

Accounting and Finance, 2006, vol. 46, issue 2, pages 221-241

Abstract: Using a unique market setting in Hong Kong, where (i) all firms release earnings and dividend information in the same announcement; (ii) corporate transparency is low; (iii) dividend income is non-taxable and (iv) corporate ownership is highly concentrated, we re-examine the corroboration effects of earnings and dividends. We use the control firm approach to avoid the return estimation bias resulting from observation clustering. We also add in variables and use econometric procedure to control for the potential impacts of earnings management, special dividends and heteroskedasticity. Our findings show that there exists a corroboration effect between the jointly announced signals. Copyright The Authors Journal compilation (c) 2006 AFAANZ.

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