Journal of Business and Management

Journal of Business and Management

ISSN: 2291-1995 (Print)    ISSN: 2291-2002 (Online)

Volume 6 (2017), No. 1, Pages 1-18

DOI: 10.12735/jbm.v6n1p1

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Dividend Policy and the Sensitivity of Firm Value to Dividend Announcements and Investment

Kyung Suh Park1  KyungJae Rhee1 

1Korea University, Seoul, Republic of Korea

URL: http://dx.doi.org/10.12735/jbm.v6n1p1

To Cite this Article     Article Views: 20     Downloads: 14  Since deposited on 2017-12-01

Abstract

We investigate how investors react differently to dividend announcement depending on the level of dividend management, and find that the stock market reacts more favorably to dividend announcements by dividend managing firms than to those of non-dividend managing firms. In addition, it takes announcements of dividend reductions by non-dividend managing firms as good news, supporting our hypothesis that decreasing dividends by non-dividend managing firms are a signal of good investment opportunities, while this is not the case for dividend managing firms. We also confirm that the dividend announcement returns of non-dividend managing firms are significantly and positively related to their annual investment levels, while it is not the case for dividend managing firms.

JEL Classifications: G11; G14; G32; G35

Keywords: dividend management; residual dividend policy; investments; dividend signaling; value of firms

To Cite this Article: Park, K. S., & Rhee, K. J. (2017). Dividend policy and the sensitivity of firm value to dividend announcements and investment. Journal of Business and Management, 6(1), 1-18. http://dx.doi.org/10.12735/jbm.v6n1p1

Copyright © K. S. Park & K. J. Rhee

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This article is published under license to Science and Education Centre of North America. This is an Open Access article distributed under the terms of the Creative Commons Attribution 4.0 International License.

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Dividend Policy and the Sensitivity of Firm Value to Dividend Announcements and Investment
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