It is a common belief among practitioners that stock splits and stock dividends are perceived by investors as good news. Numerious empirical studies find significant abnormal returns at stock distribution announcements. The mechanics of a stock distribution, however, affects neither the equity of the company nor the shareholders' ownership position. This study extends previously documented market reactions to stock distribution announcements by presenting a justification for management decisions to issue stock distributions, and provides an explanation for security price reactions to their announcements. / Based on stock price reactions to announced company earnings, an information content theory is developed where stock price reactions at stock distribution announcements are related to investors' expectations of increased future earnings. A study of earnings expectation revisions around stock distribution announcements is conducted, where changing earnings expectations are measured both ex-post and ex-ante. A matched sample design is used to compare earnings changes at stock distribution announcements between companies issuing and not issuing these distributions. / The ex-post study documents positive abnormal earnings and shifts in actual company earnings around stock distribution announcements. Through rational expectations, a significant positive relationship between stock distribution announcements and actual earnings changes indicates that investors anticipate earnings growth following these announcements. The ex-ante analysis documents a strong positive relationship between stock distribution announcements and changing analysts' forecasts of company earnings, indicating investors' expectations of future earnings are affected by stock distribution announcements. The documented relationship between stock distribution announcements and changing earnings expectations supports the hypothesis that stock distribution announcements convey information about expected future earnings increases to investors, and market reactions at stock distribution announcements reflect this expectation. The findings of this research provide insight into managements' stock distribution decisions, the role of stock distribution announcements in investment decision making, and informational signaling. / Source: Dissertation Abstracts International, Volume: 49-03, Section: A, page: 0546. / Major Professor: David R. Peterson. / Thesis (Ph.D.)--The Florida State University, 1987.
| Identifer | oai:union.ndltd.org:fsu.edu/oai:fsu.digital.flvc.org:fsu_76224 |
| Contributors | Klein, Linda Schmid., Florida State University |
| Source Sets | Florida State University |
| Language | English |
| Detected Language | English |
| Type | Text |
| Format | 216 p. |
| Rights | On campus use only. |
| Relation | Dissertation Abstracts International |
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