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A macro-analysis of financial decisions: An examination of special dividend announcements |
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| Affiliation: | 1. The University of Texas, USA;2. Deakin University, Australia;1. London Business School, Sussex Place, Regent''s Park, London NW1 4SA, United Kingdom;2. Cyprus University of Technology, Department of Commerce, Finance and Shipping, 115 Spyrou Araouzou, 3036 Lemesos, Cyprus;1. Accounting & Finance, Adelaide Business School, The University of Adelaide, Level 12, 10 Pulteney Street, Adelaide, SA 5005, Australia;2. Department of Applied Finance and Actuarial Studies, Faculty of Business and Economics, Macquarie University, E4A, Eastern Road, North Ryde, NSW 2109, Australia |
| Abstract: | This paper investigates macro-level explanations for why firms pay special dividends. We find both the business cycle and market condition affect the propensity and abnormal returns of special dividends. Firms are more likely to announce special dividends in market or economic downturns than upturns. They tend to use additional cash for business growth in expansions and distribute it to reduce agency costs in contractions. The signaling effect of special dividends is stronger and companies with these announcements are better performers in recessions than in expansions. This research sheds light on and enhances the understanding of why firms disburse extra cash dividends at the aggregate level. |
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