How the timing of dividend reductions can signal value

Tyler J. Hull

Journal of Corporate Finance, 2015, vol. 30, issue C, 114-131

Abstract: This paper examines a firm's dividend reduction timing relative to other dividend reductions in the same industry. A model is proposed where the timing of dividend cuts signals true firm value. It is suggested that during periods of lower availability of external financing, firms with greater investment opportunities are among the first to make necessary dividend reductions to take advantage of such opportunities. When external financing is more available, firms with superior investment opportunities are able to access capital markets in lieu of dividend-reducing internal financing, indicating relatively higher firm values for earlier dividend reductions during periods of costly external financing, and significantly lower relative firm values for early reductions when financing is more easily obtained.

Keywords: Dividend policy; Dividend timing; Dividend signaling (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0929119914001631
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:30:y:2015:i:c:p:114-131

DOI: 10.1016/j.jcorpfin.2014.12.011

Access Statistics for this article

Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter

More articles in Journal of Corporate Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().