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quarterly financial accounting journal 2019, 10(39): 1-30 Back to browse issues page
Investigation of Information Asymmetry Effect on Market Reaction Relative to Dividend Increase
Maryam Davallou 1, Ali Jannati
Abstract:   (1206 Views)
According to signaling theory, firms reduce information asymmetry through dividend payments. So, dividend increase followed by positive market reaction. Empirical documents show that firms with higher information asymmetry tend to have lower dividend. Given recent conflicts, this paper is aimed to investigate information asymmetry effect on market reaction relative to dividend increase. In addition, potential reasons for market reaction to dividend increase implying its information content about firms¢ risk reduction are examined. The effect of information asymmetry on return drift (long term abnormal return) also is considered. For this aim, a sample composed of 184 listed firms in Tehran Stock Exchange is examined for 1385 to 1395. Panel data regression analysis is used to test above mentioned relations. The results show that dividend increase for firms with high information asymmetry result in positive abnormal return. Firms which their idiosyncratic risk (proxy of information asymmetry) decreases after dividend increasing, experience positive abnormal return. Positive drift of return after dividend increase was clear for firms which have higher information asymmetry.
 
Keywords: Information Asymmetry, Dividend, Idiosyncratic Volatility, Abnormal Return, Drift.
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Type of Study: Research | Subject: Special
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Davallou M, Jannati A. Investigation of Information Asymmetry Effect on Market Reaction Relative to Dividend Increase. quarterly financial accounting journal. 2019; 10 (39) :1-30
URL: http://qfaj.ir/article-1-1514-en.html


year 10, Issue 39 (2019) Back to browse issues page
فصلنامه حسابداری مالی Quarterly Financial Accounting
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