Dividend Omissions and Intraindustry Information Transfers

Gary L. Caton, Jeremy Goh and Ninon Kohers

Journal of Financial Research, 2003, vol. 26, issue 1, 51-64

Abstract: We examine potential information transfers from companies that announce dividend omissions to their industry rivals. Specifically, we examine the abnormal stock returns and abnormal earnings forecast revisions of rivals after a company makes a dividend‐omission announcement. Our results show negative and significant abnormal stock returns and negative and significant abnormal forecast revisions for rival companies in response to the announcement, and a significant and positive relation between the two. We conclude that a dividend‐omission announcement transmits unfavorable information across the announcing company's industry that affects cash flow expectations and ultimately stock prices.

Date: 2003
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