The information content of cash dividend announcements in a unique environment

Khamis H. Al-Yahyaee, Toan M. Pham, Terry S. Walter

Research output: Contribution to journalArticle

44 Citations (Scopus)

Abstract

Due to its distinctive institutional background, Oman offers a valuable opportunity to examine stock price reactions to dividend announcements. In Oman, (1) there are no taxes on dividends and capital gains, (2) there is a high concentration of share ownership, (3) there is low corporate transparency, and (4) firms frequently change their dividends. Our results show that announcements of dividend increases are associated with increased stock prices, while announcements of dividend decreases cause decreases in stock prices. Firms that do not change their dividends experience insignificant negative returns. These results contradict tax-based signaling models, which argue that higher taxes on dividends relative to capital gains are a necessary condition for dividends to be informative.

Original languageEnglish
Pages (from-to)606-612
Number of pages7
JournalJournal of Banking and Finance
Volume35
Issue number3
DOIs
Publication statusPublished - Mar 2011

Fingerprint

Dividends
Information content
Cash dividends
Dividend announcements
Tax
Stock prices
Oman
Announcement
Capital gains
Stock price reaction
Corporate transparency
Signaling model
Share ownership

Keywords

  • D82
  • Dividends
  • G14
  • Information content
  • Price reaction
  • Tax effects

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this

The information content of cash dividend announcements in a unique environment. / Al-Yahyaee, Khamis H.; Pham, Toan M.; Walter, Terry S.

In: Journal of Banking and Finance, Vol. 35, No. 3, 03.2011, p. 606-612.

Research output: Contribution to journalArticle

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