Journal of Financial Economics Vol. 57 No. 3 2000
The cash-flow permanence and information content of dividend increases versus repurchases
open access
Abstract
We hypothesize that firms choose dividend increases to distribute relatively permanent cash-flow shocks and repurchases to distribute more transient shocks. As predicted, we find that post-shock cash flows of dividend increasing firms exhibit less reversion to pre-shock levels compared with repurchasing firms. We also examine whether the stock market uses the announcement of the payout method to update its beliefs about the permanence of cash-flow shocks. Controlling for payout size and the market's expectation about the permanence of the cash-flow shock, the stock price reaction to dividend increases is more positive than the reaction to repurchases.
- DOI
- 10.1016/s0304-405x(00)00062-3
- Volume
- 57
- Issue
- 3
- Pages
- 385-415
- Sources
- bibtex:phds-export.bib openalex crossref