Dividend payout, abnormal returns, and earnings growth of cross-listed firms. The situation in the Four Tigers

Yi-Pei Chen and Askar Koshoev

The Review of Finance and Banking, 2018, vol. 10, issue 2, 065-076

Abstract: Using a sample of rapidly developing “Four Tigers” (i.e. Hong Kong, Singapore, South Korea, and Taiwan), this paper investigates the influence of the cross-listing effect and the payout policy on a firm performance and valuation. While the payout policy does not significantly affect abnormal returns for both cross-listed and non-cross-listed companies, the payout policy of cross-listed firms is positively correlated with earnings growth. Further investigation reveals that the companies with higher investment opportunities, represented by Tobin’s Q, get positive reaction by foreign investors when they signal about future prospects by paying out more cash dividends. Interestingly, the domestic investors do not share the same opinion and prefer the firms to accumulate the funds for the execution of future investment projects instead of dividend distribution. The results provide evidence that the firms with investment opportunities in combination with positive payouts better stimulate earnings growth if they are cross-listed.

Date: 2018
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