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Information content of dividend changes: cash flow signalling, dividend clientele and free cash flow hypotheses / Norhayati Mohamed ... [et al.]

The study aims to identify the type of information that firms are trying to convey when they change dividend. The first step is to test the relationship between unexpected dividend changes and stock prices by employing the event study methodology. The next step is to evaluate the information content...

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Main Authors: Mohamed, Norhayati, Abdul Hamid, Mohamad Ali, Md Nassir, Annuar, Mohamed, Shamsher
Format: Article
Language:English
Published: Accounting Research Institute (ARI) & Faculty of Accountancy 2006
Online Access:http://ir.uitm.edu.my/id/eprint/268/1/AJ_NORHAYATI%20MOHAMAD%20MAR%2006.pdf
http://ir.uitm.edu.my/id/eprint/268/
https://mar.uitm.edu.my/
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spelling my.uitm.ir.2682017-09-21T04:15:06Z http://ir.uitm.edu.my/id/eprint/268/ Information content of dividend changes: cash flow signalling, dividend clientele and free cash flow hypotheses / Norhayati Mohamed ... [et al.] Mohamed, Norhayati Abdul Hamid, Mohamad Ali Md Nassir, Annuar Mohamed, Shamsher The study aims to identify the type of information that firms are trying to convey when they change dividend. The first step is to test the relationship between unexpected dividend changes and stock prices by employing the event study methodology. The next step is to evaluate the information content of dividend changes in the context of three hypotheses: the cash flow signalling hypothesis, the dividend clientele hypothesis and the free cash flow hypothesis. Past explanation to the effect of dividend changes on stock prices is that firms are signalling their current and/or future cash flow of the firm, or known as the cash flow signalling hypothesis. Later studies have incorporated other explanations, which are the dividend clientele hypothesis and the free cash flow hypothesis. Regression analysis is applied to study the wealth effect of dividend changes on stock prices and to test for the three hypotheses. The effect of firm size on the relationship between dividend changes and stock prices are also analysed by using total assets per share as the proxy variable for firm size. The findings show a significant relationship between unexpected dividend changes and stock prices, which also constitute support for the cash flow signalling hypothesis. Mixed support is found for the dividend clientele hypothesis while strong support is found for the free cash flow hypothesis. Next, the finding on the size variable indicates that firm size affect the relationship between unexpected dividend and stock prices; however, the relationship is not significant. Accounting Research Institute (ARI) & Faculty of Accountancy 2006-05 Article PeerReviewed text en http://ir.uitm.edu.my/id/eprint/268/1/AJ_NORHAYATI%20MOHAMAD%20MAR%2006.pdf Mohamed, Norhayati and Abdul Hamid, Mohamad Ali and Md Nassir, Annuar and Mohamed, Shamsher (2006) Information content of dividend changes: cash flow signalling, dividend clientele and free cash flow hypotheses / Norhayati Mohamed ... [et al.]. Malaysian Accounting Review, 5 (1). pp. 65-84. ISSN 1675-4077 https://mar.uitm.edu.my/
institution Universiti Teknologi Mara
building Tun Abdul Razak Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Teknologi Mara
content_source UiTM Institutional Repository
url_provider http://ir.uitm.edu.my/
language English
description The study aims to identify the type of information that firms are trying to convey when they change dividend. The first step is to test the relationship between unexpected dividend changes and stock prices by employing the event study methodology. The next step is to evaluate the information content of dividend changes in the context of three hypotheses: the cash flow signalling hypothesis, the dividend clientele hypothesis and the free cash flow hypothesis. Past explanation to the effect of dividend changes on stock prices is that firms are signalling their current and/or future cash flow of the firm, or known as the cash flow signalling hypothesis. Later studies have incorporated other explanations, which are the dividend clientele hypothesis and the free cash flow hypothesis. Regression analysis is applied to study the wealth effect of dividend changes on stock prices and to test for the three hypotheses. The effect of firm size on the relationship between dividend changes and stock prices are also analysed by using total assets per share as the proxy variable for firm size. The findings show a significant relationship between unexpected dividend changes and stock prices, which also constitute support for the cash flow signalling hypothesis. Mixed support is found for the dividend clientele hypothesis while strong support is found for the free cash flow hypothesis. Next, the finding on the size variable indicates that firm size affect the relationship between unexpected dividend and stock prices; however, the relationship is not significant.
format Article
author Mohamed, Norhayati
Abdul Hamid, Mohamad Ali
Md Nassir, Annuar
Mohamed, Shamsher
spellingShingle Mohamed, Norhayati
Abdul Hamid, Mohamad Ali
Md Nassir, Annuar
Mohamed, Shamsher
Information content of dividend changes: cash flow signalling, dividend clientele and free cash flow hypotheses / Norhayati Mohamed ... [et al.]
author_facet Mohamed, Norhayati
Abdul Hamid, Mohamad Ali
Md Nassir, Annuar
Mohamed, Shamsher
author_sort Mohamed, Norhayati
title Information content of dividend changes: cash flow signalling, dividend clientele and free cash flow hypotheses / Norhayati Mohamed ... [et al.]
title_short Information content of dividend changes: cash flow signalling, dividend clientele and free cash flow hypotheses / Norhayati Mohamed ... [et al.]
title_full Information content of dividend changes: cash flow signalling, dividend clientele and free cash flow hypotheses / Norhayati Mohamed ... [et al.]
title_fullStr Information content of dividend changes: cash flow signalling, dividend clientele and free cash flow hypotheses / Norhayati Mohamed ... [et al.]
title_full_unstemmed Information content of dividend changes: cash flow signalling, dividend clientele and free cash flow hypotheses / Norhayati Mohamed ... [et al.]
title_sort information content of dividend changes: cash flow signalling, dividend clientele and free cash flow hypotheses / norhayati mohamed ... [et al.]
publisher Accounting Research Institute (ARI) & Faculty of Accountancy
publishDate 2006
url http://ir.uitm.edu.my/id/eprint/268/1/AJ_NORHAYATI%20MOHAMAD%20MAR%2006.pdf
http://ir.uitm.edu.my/id/eprint/268/
https://mar.uitm.edu.my/
_version_ 1685648045368147968
score 13.211869

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