Information effects of dividends: Evidence from the Hong Kong market

Louis Cheng (), Hung-Gay Fung () and Tak Leung ()

Review of Quantitative Finance and Accounting, 2007, vol. 28, issue 1, 23-54

Abstract: The literature has suggested that earnings and earnings forecasts provide stronger signals than dividends about future performance of a firm. We test the information effects of simultaneous announcement of earnings and dividends in the Hong Kong market, distinguished by three interesting features (concentrated family-shareholdings, low corporate transparency, and no tax on dividends). Our results show significant share price reactions to unexpected earnings and dividend changes, but dividends appear to play a dominant role over earnings in pricing, a result contrary to findings in the literature. The signaling hypothesis works primarily for firms with earning increases, while the maturity hypothesis works mainly for firms with earnings declines. Copyright Springer Science+Business Media, LLC 2007

Keywords: Earnings; Dividends; Price reaction; Information effects (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (12)

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DOI: 10.1007/s11156-006-0002-y

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