Title

The Earnings Information Content of Dividend Initiations and Omissions

Publication Type

Journal Article

Publication Date

2001

Abstract

Previous studies have found that dividend initiations and omissions convey important information about subsequent earnings changes. However, this finding may be subject to a sample survival bias. We find that survivorship does not affect the positive relation between dividend changes and past earnings changes. Also, we find dividend omitting firms are able to generate significantly positive earnings one to two years after the omission. However, contrary to previous findings, firms' earnings are not significantly increased following the dividend initiation. The results suggest that survivorship tends to bias inference toward finding that dividends signal future earnings.

Discipline

Business

Research Areas

Finance

Publication

Journal of Business Finance and Accounting

Volume

28

Issue

7&8

First Page

963

Last Page

977

ISSN

0306-686X

Identifier

10.1111/1468-5957.00400

Publisher

Wiley