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Article
Dividend reductions, the timing of dividend payments and information content
Journal of Corporate Finance (2012)
  • Chandrasekhar Krishnamurti
Abstract

Australian companies pay dividends semi-annually with smaller 'interim' payments and larger 'final' payments. Interim dividends are declared and paid within a less full information environment than final dividends. We analyze the interactions between the timing of dividends and their information content, controlling for share repurchase and tax effects. Dividend reductions that are not associated with share repurchases are statistically significantly related to future abnormal earnings and provide strong support for the information content of dividend reductions. The percentage of dividend reduction is stronger for interim than for final dividend reductions. The market reaction is negatively related to the reduction in imputation tax credit and reacts more aggressively and negatively to interim as compared to final dividend reductions.

Keywords
  • Australia,
  • dividend reductions,
  • franked and unfranked,
  • information content,
  • interim and final,
  • price reactions
Disciplines
Publication Date
2012
Citation Information
Chandrasekhar Krishnamurti. "Dividend reductions, the timing of dividend payments and information content" Journal of Corporate Finance Vol. 18 Iss. 5 (2012)
Available at: http://works.bepress.com/chandrasekhar_krishnamurti/5/