Investigation of Information Asymmetry Effect on Market Reaction Relative to Dividend Increase

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DAVALLOU MARYAM; JANNATI ALI

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Journal: FINANCIAL ACCOUNTING Year:2018 | Volume:10 | Issue:39 Page(s): 1-30

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Title

Investigation of Information Asymmetry Effect on Market Reaction Relative to Dividend Increase

Author(s)

DAVALLOU MARYAM | JANNATI ALI | Issue Writer Certificate

Keywords

Information AsymmetryQ2

DividendQ2

Idiosyncratic VolatilityQ1

Abnormal ReturnQ2

DriftQ1

Abstract

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.

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APA: Copy

DAVALLOU, MARYAM, & JANNATI, ALI. (2018). Investigation of Information Asymmetry Effect on Market Reaction Relative to Dividend Increase. FINANCIAL ACCOUNTING, 10(39 ), 1-30. SID. https://sid.ir/paper/168258/en

Vancouver: Copy

DAVALLOU MARYAM, JANNATI ALI. Investigation of Information Asymmetry Effect on Market Reaction Relative to Dividend Increase. FINANCIAL ACCOUNTING[Internet]. 2018;10(39 ):1-30. Available from: https://sid.ir/paper/168258/en

IEEE: Copy

MARYAM DAVALLOU, and ALI JANNATI, “Investigation of Information Asymmetry Effect on Market Reaction Relative to Dividend Increase,” FINANCIAL ACCOUNTING, vol. 10, no. 39 , pp. 1–30, 2018, [Online]. Available: https://sid.ir/paper/168258/en

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