Information Flow and Liquidity around Anticipated and Unanticipated Dividend Announcements

John R. Graham, Jennifer L. Koski and Uri Loewenstein
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John R. Graham: Duke University
Jennifer L. Koski: University of Washington
Uri Loewenstein: University of Utah

Journal of Business, 2006, vol. 79, issue 5, pages 2301-2336

Abstract: We study dividend announcements, conditioning on whether the timing of the announcement is anticipated. We find that liquidity deteriorates before (after) anticipated (unanticipated) announcements. We identify both timing and content effects and also contrast trading volume, price volatility, adverse selection, and price impact separately for anticipated and unanticipated events. Our results generally imply that news announcements reduce information asymmetry. An implication of our analysis is that market reactions around information events differ depending on whether an event's timing is known in advance. Therefore, researchers should consider whether event timing is known ex ante when studying news announcements.

Date: 2006

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