When there is informational asymmetry between managers and outside investors, managers can use dividend announcements to send signals about a firm's real prospects to outside investors. As dividends need not be directly related to a firm's earnings prospects, dividend signals are indirect messages from managers. / Previous studies have used excess returns to measure the information effects of dividend announcements. Both changes in expected future cash flows and changes in risk influence stock prices so that excess returns provide a clear signal only when the impact of an event is in one direction. However, average excess returns across a sample may not provide evidence on the information effects of an event when both positive and negative impacts occur within the sample. / The information measure developed here relies on information theory and reflects both separate and aggregate impacts of changes in expected values and changes in uncertainty. The empirical analysis uses jointly estimated implied stock prices (ISPs) and implied standard deviations (ISDs) (using call option data in the Berkeley Options Data Base) as measures of expected cash flows and anticipated risk. / The empirical results here support the hypothesized information content of dividend announcements, confirming results of previous studies. ISDs generally decrease and ISPs increase after dividend announcements. When dividend announcements are grouped into unexpected increases, expected increases, and unchanged dividends, increases in ISPs are largest for unexpected increases. The results also indicate that risk decreases or remains unchanged after dividend announcements. This study argues that due to resolution of uncertainty about imminent dividends, risk decreases after dividend announcements; the empirical results support this argument. / Excess returns were regressed on the information measure; results indicate that excess returns are primarily explained by changes in ISPs and that incremental changes in risk are not significantly related to excess returns. / The sample sizes for this empirical study are small. Results of the empirical analyses generally support the hypotheses proposed in the paper, but results are not statistically significant (at $\alpha \leq$.05). / Source: Dissertation Abstracts International, Volume: 52-02, Section: A, page: 0632. / Major Professor: Elton Scott. / Thesis (Ph.D.)--The Florida State University, 1991.
| Identifer | oai:union.ndltd.org:fsu.edu/oai:fsu.digital.flvc.org:fsu_78425 |
| Contributors | Kang, Jong Man., Florida State University |
| Source Sets | Florida State University |
| Language | English |
| Detected Language | English |
| Type | Text |
| Format | 114 p. |
| Rights | On campus use only. |
| Relation | Dissertation Abstracts International |
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