The information content of cash dividend announcements in a unique environment |
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Authors: | Khamis H. Al-Yahyaee Toan M. Pham |
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Affiliation: | a Department of Economics and Finance, College of Commerce and Economics, Sultan Qaboos University, Sultanate of Oman, Oman b School of Banking and Finance, Australian School of Business, University of New South Wales, Australia c School of Finance and Economics, University of Technology Sydney, Australia |
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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. |
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Keywords: | D82 G14 |
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