The post–announcement performance of dividend–changing companies: the dividend–signalling hypothesis revisited

Abeyratna Gunasekarage, David M. Power

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    22 Citations (Scopus)


    This study revisits the dividend–signalling hypothesis by examining the post–announcement performance of U.K. companies which disclose dividend and earnings news to the capital market on the same day. For this purpose, we first analyse market–adjusted excess returns for three periods around the announcement and then examine the financial performance in the year of the announcement and in the subsequent five–year period. The near announcement excess returns and the announcement–year financial profiles provide strong evidence in support of the dividend–signalling hypothesis. However, in contrast to the predictions of the hypothesis, the longer–term results suggest that the companies which announce a reduction in both dividends and earnings (bad news companies) outperform their dividend–increasing counterparts.
    Original languageEnglish
    Pages (from-to)131-151
    Number of pages21
    JournalAccounting and Finance
    Issue number2
    Publication statusPublished - 2002



    • Business finance
    • Company finance
    • Dividends

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