A macro-analysis of financial decisions: An examination of special dividend announcements

Hamid Beladi, Chi-Chur Chao and May Hu

International Review of Financial Analysis, 2016, vol. 48, issue C, 162-181

Abstract: This paper investigates macro-level explanations for why firms pay special dividends. We find both the business cycle and market condition affect the propensity and abnormal returns of special dividends. Firms are more likely to announce special dividends in market or economic downturns than upturns. They tend to use additional cash for business growth in expansions and distribute it to reduce agency costs in contractions. The signaling effect of special dividends is stronger and companies with these announcements are better performers in recessions than in expansions. This research sheds light on and enhances the understanding of why firms disburse extra cash dividends at the aggregate level.

Keywords: Special dividends; Market driven; Business cycle (search for similar items in EconPapers)
JEL-codes: G12 G14 G35 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:48:y:2016:i:c:p:162-181

DOI: 10.1016/j.irfa.2016.09.015

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