Shareholder wealth effects of stock dividends in a unique environment

Research output: Contribution to journalArticle

7 Citations (Scopus)

Abstract

We investigate shareholder wealth effects of stock dividends using a unique dataset from Oman in which many market frictions that are used to explain the stock dividend announcement effect are either absent or limited. We find a positive stock market reaction to stock dividend distributions. We also find that firms that distribute stock dividends experience favorable changes in operating performance during the seven-year period around the stock dividend distribution. Our results suggest that stock dividends are used primarily to signal future operating performance and to a lesser extent to reduce stock prices to an optimal trading range.

Original languageEnglish
Pages (from-to)66-81
Number of pages16
JournalJournal of International Financial Markets, Institutions and Money
Volume28
Issue number1
DOIs
Publication statusPublished - Jan 2014

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Wealth effect
Shareholder wealth
Stock dividends
Operating performance
Announcement effect
Stock market reaction
Market frictions
Dividend announcements
Stock prices
Oman

Keywords

  • Bid-ask spread
  • Market microstructure
  • Signaling
  • Stock dividends
  • Trading range

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this

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abstract = "We investigate shareholder wealth effects of stock dividends using a unique dataset from Oman in which many market frictions that are used to explain the stock dividend announcement effect are either absent or limited. We find a positive stock market reaction to stock dividend distributions. We also find that firms that distribute stock dividends experience favorable changes in operating performance during the seven-year period around the stock dividend distribution. Our results suggest that stock dividends are used primarily to signal future operating performance and to a lesser extent to reduce stock prices to an optimal trading range.",
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AB - We investigate shareholder wealth effects of stock dividends using a unique dataset from Oman in which many market frictions that are used to explain the stock dividend announcement effect are either absent or limited. We find a positive stock market reaction to stock dividend distributions. We also find that firms that distribute stock dividends experience favorable changes in operating performance during the seven-year period around the stock dividend distribution. Our results suggest that stock dividends are used primarily to signal future operating performance and to a lesser extent to reduce stock prices to an optimal trading range.

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