Journal of Finance Vol. 42 No. 2 1987
A Theory of Stock Price Responses to Alternative Corporate Cash Disbursement Methods: Stock Repurchases and Dividends
Abstract
This paper develops a model in which managers can signal their firms' true values by using either a dividend or a stock repurchase or both. The authors explain a number of stylized facts about these cash‐disbursement mechanisms, particularly those concerning the relative magnitudes of stock price responses to dividends and repurchases. Most importantly, they explain why a stock repurchase elicits a significantly higher price response, on average, than a dividend announcement.
- DOI
- 10.1111/j.1540-6261.1987.tb02572.x
- Volume
- 42
- Issue
- 2
- Pages
- 365-394
- Language
- en
- Sources
- openalex crossref