Dividend initiations, increases and idiosyncratic volatility

Bong Soo Lee and Nathan Mauck

Journal of Corporate Finance, 2016, vol. 40, issue C, 47-60

Abstract: We examine three aspects of the relation between dividend initiation and increase announcements and idiosyncratic volatility. First, consistent with dividend signaling, we find that firms with higher levels of idiosyncratic volatility are associated with higher announcement abnormal returns when initiating or increasing dividends. Second, firms on average experience an ex post reduction in idiosyncratic volatility following dividend initiations that is associated with announcement and long-term abnormal returns. Finally, high idiosyncratic volatility firms are associated with stronger positive post event return drift.

Keywords: Dividends; Signaling; Information asymmetry; Volatility; Idiosyncratic volatility (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:40:y:2016:i:c:p:47-60

DOI: 10.1016/j.jcorpfin.2016.07.005

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