Does Dividend Policy Relate to Cross‐Sectional Variation in Information Asymmetry? Evidence from Returns to Insider Trades |
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| Authors: | Kenneth Khang Tao-Hsien Dolly King |
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| Affiliation: | Kenneth Khang is an assistant professor of finance at Idaho State University in Pocatello, ID. Tao-Hsien Dolly King is an associate professor of finance at the University of North Carolina - Charlotte in Charlotte, NC |
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| Abstract: | We examine the relation between dividends and information asymmetry by using insider returns as a proxy for information asymmetry. We find that dividends are negatively related to returns to insider trades across firms. Firms that pay consistently high dividends have lower insider returns than do firms that pay consistently low dividends. These results do not support traditional dividend signaling models. Rather, they are consistent with the proposition that firms with the highest dividends have the lowest levels of information asymmetry. |
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