Skip to main content
SpringerLink
Log in

Earnings expectations and the relative information content of dividend and earnings announcements

  • Published:
Journal of Economics and Finance Aims and scope Submit manuscript

Abstract

Recent studies of financial analysis' earnings forecast revisions following dividend announcements suggest that dividends convey information regarding a firm's future prospects. In this study, we extend the analysis by explicitly controlling for earnings information released during the forecast revision measurement period. Our results suggest that earnings forecast revisions previously attributed to dividend announcements are driven primarily by earnings surprise. At best, dividends appear to serve a corroborative role.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Aharony, J., and I. Swary. 1980. “Quarterly Dividend and Earnings Announcements and Stockholders' Returns: An Empirical Analysis.”Journal of Finance 35: 1–12.

    Article  Google Scholar 

  • Asquith, P., and D. Mullins. 1983. “The Impact of Initiating Dividend Payments on Shareholders' Wealth.”Journal of Business 56: 77–96.

    Article  Google Scholar 

  • Bhattacharya, S. 1979. “Imperfect Information, Dividend Policy and the ‘Bird-in-the-Hand' Fallacy.”Bell Journal of Economics 10: 259–270.

    Article  Google Scholar 

  • Brickley, J. A. 1983. “Shareholder Wealth Information Signaling and the Specially Designated Dividend: An Empirical Study.”Journal of Financial Economics 12: 187–210.

    Article  Google Scholar 

  • Brown, L. D., and M. S. Rozeff. 1978. “The Superiority of Analyst Forecasts as Measures of Expectations: Evidence from Earnings.”Journal of Finance 33: 1–16.

    Article  Google Scholar 

  • Brous, A. 1992. “Common Stock Offerings and Earnings Expectations: A Test of the Release of Unfavorable Information.”Journal of Finance 47: 1517–1536.

    Article  Google Scholar 

  • Charest, G. 1978. “Dividend Information, Stock Returns and Market Efficiency.”Journal of Financial Economics 6: 297–330.

    Article  Google Scholar 

  • DeAngelo, H., L. DeAngelo, and D. J. Skinner. 1992. “Dividends and Losses.”Journal of Finance 47: 1837–1864.

    Article  Google Scholar 

  • Denis, J., D. K. Denis, and A. Sarin. 1994. “The Information Content of Dividend Changes: Cash Flow Signaling, Overinvestment, and Dividend Clienteles.”Journal of Financial and Quantitative Analysis 29: 567–587.

    Article  Google Scholar 

  • Eades, K. M. 1982. “Empirical Evidence on Dividends as a Signal of Firm Value.”Journal of Financial and Quantitative Analysis 17: 471–500.

    Article  Google Scholar 

  • Ely, K. M., and V. Mande. 1996. “The Interdependent Use of Earnings and Dividends in Financial Analysts' Earnings Forecasts.”Contemporary Accounting Research 13: 435–456.

    Article  Google Scholar 

  • Fried, D., and D. Givoly. 1982. “Financial Analysts' Forecasts of Earnings: A Better Surrogate for Earnings Expectations.”Journal of Accounting and Economics 4: 85–107.

    Article  Google Scholar 

  • Healy, P., and K. Palepu. 1988. “Earnings Information Conveyed by Dividend Initiations.”Journal of Financial Economics 21: 149–175.

    Article  Google Scholar 

  • John, K., and J. Williams. 1985. “Dividends, Dilution, and Taxes: A Signaling Equilibrium.”Journal of Finance 40: 1053–1070.

    Article  Google Scholar 

  • Kane, A., Y. K. Lee, and A. Marcus. 1984. “Earnings and Dividend Announcements: Is There a Corroboration Effect?”Journal of Finance 39: 1091–1098.

    Article  Google Scholar 

  • Lang, L. H. P., and R. H. Litzenberger. 1989. “Dividend Announcements: Cash Flow Signaling versus Free Cash Flow Hypothesis?”Journal of Financial Economics 24: 181–191.

    Article  Google Scholar 

  • Leftwich, R., and M. E. Zmijewski. 1994. “Contemporaneous Announcements of Dividends and Earnings.”Journal of Accounting, Auditing and Finance 9: 725–762.

    Google Scholar 

  • Miller, M. H., and K. Rock. 1985. “Dividend Policy under Asymmetric Information.”Journal of Finance 40: 1031–1051.

    Article  Google Scholar 

  • O'Brien, C. P. 1988. “Analysts' Forecasts as Earnings Expectations.”Journal of Accounting and Economics 10: 53–83.

    Article  Google Scholar 

  • Ofer, A. R., and D. R. Siegel. 1987. “Corporate Financial Policy, Information, and Market Expectations: An Empirical Investigation of Dividends.”Journal of Finance 42: 889–911.

    Article  Google Scholar 

  • Pettit, R. R. 1972. “Dividend Announcements, Security Performance, and Capital Market Efficiency.”Journal of Finance 27: 993–1007.

    Article  Google Scholar 

  • White, H. 1980. “A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity.”Econometrica 48: 817–838.

    Article  Google Scholar 

  • Yoon, P. S., and L. T. Starks. 1995. “Signaling, Investment Opportunities, and Dividend Announcements.”The Review of Financial Studies 8: 995–1018.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Harmon College of Business Administration, Central Missouri State University, 64093, Warrensburg, MO

    Roger J. Best

  2. Department of Accounting and Finance, Richards College of Business, State University of West Georgia, 30118, Carrollton, GA

    Ronald W. Best

Authors
  1. Roger J. Best
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Ronald W. Best
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Roger J. Best.

Additional information

The authors gratefully acknowledge the contribution of I/B/E/S Inc. for providing earnings per share forecast data, available through the Institutional Brokers Estimate System.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Best, R.J., Best, R.W. Earnings expectations and the relative information content of dividend and earnings announcements. J Econ Finan 24, 232–245 (2000). https://doi.org/10.1007/BF02752605

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1007/BF02752605

Keywords

Search

Navigation