 The devil is in the details: Does information in credit rating announcements affect dividend policy?Konstantinos Kakouris, Evangelos Charalambakis and Dimitrios Psychoyios Global Finance Journal, 2025, vol. 67, issue C Abstract: While recent studies have explored how firms react to credit rating events, the specific impact of news disclosed in credit rating change announcements on dividend policy remains largely unexplored. We analyze a sample of dividend paying firms that consistently paid dividends from 1995 to 2019 to examine whether, and to what extent, firms adjust dividend policy in credit rating shocks. Focusing on the type of information conveyed to the capital markets, we identify three types of downgrades, namely, “bad”, “good”, and “systemic” and upgrades associated with strong financial performance. We provide evidence that firms smooth dividends more under a “good” downgrade and less under a “bad” downgrade, a “systemic” downgrade and an upgrade. In favor of this finding, we show that dividend forecast errors are positively associated with “bad” downgrades, “systemic” downgrades and upgrades, but are not associated with “good” downgrades. Keywords: Dividend policy; Dividend forecast errors; Credit rating change announcements; Wealth transfer hypothesis; Dividend signaling; Information asymmetry (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:67:y:2025:i:c:s1044028325000808 DOI: 10.1016/j.gfj.2025.101153 Access Statistics for this article Global Finance Journal is currently edited by Manuchehr Shahrokhi More articles in Global Finance Journal from Elsevier |
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