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This paper aims to examine the relationship between the dividend signaling hypothesis and a firm's life cycle.

The authors use Dickinson's (2011) methodology to develop a proxy for the firm's stages in its life cycle and to examine the relationship between dividends and future earnings following a nonlinear setting.

Using a sample of US firms during the 2000–2014 period, the authors find that the signaling hypothesis can be dependent on firm-specific characteristics, such as life cycle stages. The authors report that the relationship between dividend changes and subsequent earnings changes is different for different life stages. They also find that changes in the amount of the dividend provide some information about future earnings, especially during the early (introductory and growth) stages. These results are consistent with the use of earnings or return on assets as the dependent variables in models of earnings expectations.

The authors believe that this is the first time that the dividend signaling hypothesis has been linked to the life cycle of the firm.

The purpose of this paper is to examine the signaling and free cash flow hypotheses of dividends in the context of an emerging financial market.

The authors use fundamental financial information of Chinese companies listed in the Shenzhen and Shanghai stock exchanges. They examine the impact of cash dividend payments on future profitability of individual firms with and without controlling for non-linearity in their earnings to test the signaling hypothesis. They also determine the characteristics of dividend paying firms to examine the free cash flow hypothesis.

It was found that while dividend increases by publicly listed Chinese firms are followed by increases in earnings in two subsequent years, such relationship does not exist in the case of dividend decreases. However, under the assumption of non-linearity of earnings, it was found that neither dividend increases nor dividend decreases convey any valuable information about future changes in earnings of Chinese firms. Further, it was found that firms with high cash holdings, large profitability and high managerial efficiency are likely to pay dividends. The authors therefore conclude that announcements of cash dividend payments do not signal future performance but indicate good governance practices of publicly traded firms in China.

This evidence is critical for potential foreign investors in their portfolio investment decisions and for regulators in determining an efficient measure of corporate disclosure in China.

This paper examines the determinants of corporate dividend policy in Jordan. The study uses a firm‐level panel data set of all publicly traded firms on the Amman Stock Exchange between 1989 and 2000. The study develops eight research hypotheses, which are used to represent the main theories of corporate dividends. A general‐to‐specific modeling approach is used to choose between the competing hypotheses. The study examines the determinants of the amount of dividends using Tobit specifications. The results suggest that the proportion of stocks held by insiders and state ownership significantly affect the amount of dividends paid. Size, age, and profitability of the firm seem to be determinant factors of corporate dividend policy in Jordan. The findings provide strong support for the agency costs hypothesis and are broadly consistent with the pecking order hypothesis. The results provide no support for the signaling hypothesis.

The purpose of this paper is to examine the dividend initiation announcements made by firms in the information technology sector as defined in a modern system of industrial classification.

On the basis of a modern classification of the information technology industry, the authors examine a wide range of corporate performance and management measures to discriminate between the two theories of the information revealed by the announcement of dividend initiations, the signaling, and life cycle theories.

The empirical results are more consistent with the corporate life cycle theory of dividends than with the information signaling hypothesis. This finding helps clarify the nature of the information revealed by the announcement.

The paper has clear implications for investors who are interested in the growth prospects of technology firms, or for others interested in their prospective stability and degree of maturity.

The literature on the relation between dividends and stock risks include mixed results. The related studies have reached either insignificant, or positive, or negative results. The authors offer a mathematical structure that addresses potential mutual benefits of dividends signaling under conditions of stock risks (systematic and unsystematic). The mathematical structure demonstrates explicitly a case of risk transfer. The purpose of this paper is to examine the potential benefits to firms and stockholders when financial managers adjust dividends per share (DPS) using percentage change in the explanatory power of systematic and unsystematic risks. This perspective is derived from a practical consideration that dividends are part of stock returns that can be adjusted to take stock risks into account.

The paper utilizes the specifications of the two-stage (simultaneous) regression and partial adjustment model. The sample includes quarterly data for firms listed in the Dow Jones Industrial Average and NASDAQ for the period December 31, 1989-March 31, 2011.

The authors have reached general results based on hypotheses developed from related literature. The results show that: first, benefits of risk transfer can be realized. That is, firms as well as stockholders achieve benefits when the DPS are adjusted using percentage change in the explanatory power of systematic risk only; second, dividend growth rates are affected positively by changes in systematic risks; third, the highest stock returns in the market are reached with sharp decreases in dividend growth rates; fourth, in the highest returns quartile, firm size and time do not matter but the industry type does; and fifth, the associations between dividend growth rates, systematic, unsystematic risks, and stock returns are intrinsically nonlinear.

The study contributes to the literature in terms of first, providing practical insights on the financial strategies that help in the use of dividends to convey the right signals to stockholders, and second, empirically show the potential benefits of adjusting dividends growth rates according to systematic and unsystematic stock risks in a unified mathematical structure that adds to the current literature.

The purpose of this paper is to investigate the stock market response to dividend announcements in high growth emerging markets of Gulf countries.

The sample includes 1,092 dividend announcements from 299 listed firms over the period 2010-2015.

In the environment where there is an absence of capital gain and income tax, the authors find some evidence for the stock price reaction that partly supports the signaling hypothesis. The findings show that the Gulf Cooperation Council (GCC) market is inefficient because of the leakage information before the announcement in bad news, and the delay of share price adjustment in good news. In addition, the authors report significant trading volume (TV) reaction in all the three announcements clusters, where dividends increase, decrease, and are constant, lending support to the hypothesis that the dividend change announcements have an impact on the TV response due to different investors’ preferences.

This is the first empirical paper on market reaction in share price and TV around dividend announcement using data for the majority of GCC countries.

Very little is known about the effect of dividend announcements on stock prices in Nigeria, despite the country’s unique institutional environment. The purpose of this paper is, therefore, to provide empirical evidence on this issue by investigating the stock price reaction to cash dividends by companies listed on the Nigerian Stock Exchange.

Standard event study methodology, using the market model, is employed to determine the abnormal returns surrounding the cash dividend announcement date. Abnormal returns are also calculated employing the market-adjusted return model as a robustness check and to test the sensitivity of the results to β estimation. The authors also examine the interaction between cash dividends and earnings by estimating a regression model where announcement abnormal returns are a function of both dividend changes and earnings changes relative to stock price.

The study find support for the signaling hypothesis: dividend increases are associated with positive stock price reaction, while dividend decreases are associated with negative stock price reaction. Companies that do not change their dividends experience insignificant positive abnormal returns. The results also suggest that both dividends and earnings are informative, but dividends contain information beyond that contained in earnings.

The sample for the study includes only cash dividend announcements occurring without other corporate events (such as interim dividends, stock splits, stock dividends, and mergers and acquisitions) during the event study period. The small firm-year observations may limit the validity of generalizations from these conclusions.

The findings are useful to researchers, practitioners and investors interested in companies listed on the Nigerian stock market for their proper strategic decision making. In particular, the results can be used to encourage transparency and good governance practices in the Nigerian stock market.

This paper adds to the very limited research on the stock market reaction to cash dividend announcements in Nigeria; it is the first of its kind employing a unique cash dividends data.

This chapter presents both main arguments of dividend policy theories and their empirical evidence. According to Miller and Modigliani (1961), dividend decisions are not relevant to firm value in a perfect capital market. Nevertheless, there are several market frictions in the real world (e.g., information asymmetry, agency problems, transaction costs, firm maturity, catering incentives and taxes). Therefore, academics use them to develop theories which help them explain corporate dividend decisions. Particularly, signaling theory considers dividend payments as a signal about firms' future prospects since outside investors face information disadvantage. “Bird-in-hand” theory argues that investors prefer dividends to capital gains since the former have lower risk than the latter. Agency theory is developed from the conflict of interest between corporate managers and shareholders. Corporate managers have high incentives to restrict dividend payments. Furthermore, transaction cost theory and pecking order theory posit that firms prefer internal to external funds. This drives firms to hold more cash and pay less dividends. Life cycle theory explains dividend policy by firm maturity. Mature firms have fewer investment opportunities, and thus, they tend to pay more dividends. Catering theory states that dividend decisions are based on investors' demand. Firms pay more dividends since investors prefer dividends and assign higher value to dividend payers. Tax clientele theory argues that firms that have corporate dividend policy rely on the comparative income tax rates for dividends and capital gains. Under the tax discriminations against dividends, firms tend to restrict their dividends in order to increase their stock prices.

The purpose of this paper is to examine the relation between managerial entrenchment and dividend policy for a large number of US industrial firms and examine the relative importance of three competing explanations behind the empirical association between managerial entrenchment and dividend policy, namely, the entrenchment irrelevance hypothesis, the dividend signaling hypothesis, and the optimal entrenchment hypothesis.

Utilizing all firms in the Investor Responsibility Research Center database, Compustat and center for research in security prices (CRSP), this paper investigates firm's propensity to pay dividends based on various logit and Tobit regressions as a function of managerial entrenchment measured by Gompers et al. G index after controlling for known determinants of firms' dividend decisions during the period from 1990 to 2003.

Results show that firms with entrenched managers are more likely to pay dividends. Their high propensity to pay persists over time. A large cash reserve can be used to deter hostile takeovers. Paying dividends reduces cash holdings, leaving the firm more vulnerable to hostile takeovers. In equilibrium, value‐maximizing firms with weak investment opportunities provide managers against takeovers to induce them to distribute cash rather than build a warchest against unwanted takeovers.

The main finding confirms the belief that firms choose a combination of anti‐takeover provisions and dividend policy to maximize shareholder value, evidence in favor of the optimal entrenchment hypothesis.

The purpose of this paper is to empirically investigate stock price and trading volume reactions to simultaneous interim dividend and earnings announcements by the Greek firms listed on the Athens stock exchange (ASE).

Classical event study methodology was employed to examine the share price and trading volume reaction to interim dividends and earnings announcements.

Results confirm the signaling hypothesis which predicts positive market reaction to the joint dividend and earnings announcements. However, the magnitude of the price reaction initiated by the final dividend announcement seems to be higher than the one by the interim dividend announcement.

The observations are not many, although the whole population was included, since there are no data available prior to 1998.

The findings are useful to researchers, practitioners and investors who have an interest in firms listed on the ASE for their proper strategic decision making.

For the first time, the stock price and trading volume behaviour of firms listed on the ASE around contemporaneous dividend and earnings announcement dates is examined.