Browsing Research documents by Author "Raaballe, Johannes"
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Evidence from DenmarkBechmann, Ken L.; Raaballe, Johannes (København, 2004)[More information][Less information]
Abstract: Abstract It is often asserted that stock splits and stock dividends are purely cosmetic events. However, many studies have documented several stock market effects associated with stock splits and stock dividends. This paper examines the effects of these two types of events for the Danish stock market. Consistent with the existing literature, the two events are associated with a significantly positive announcement effect of ap- proximately 2.5%. However, when examining the two events more carefully, several important results are obtained. First, a firm's motivation for announcing the two events is completely different. Second, the positive stock market reaction is closely related to associated changes in a firm's payout policy, but the relationship varies for the two types of events. Finally, there is only very weak evidence for a change in the liquidity of the stock. On the whole, after controlling for the firm's payout policy, the results suggest that a stock split is a cosmetic event and that a stock dividend on its own is considered negative news. Key words: Stock splits; Stock dividends; Cash dividends; Signaling; Liquidity URI: http://hdl.handle.net/10398/7181 Files in this item: 1
2004_1.pdf (360.0Kb) -
implication : two shares - one priceBechmann, Ken L.; Raaballe, Johannes (København, 2000)[More information][Less information]
URI: http://hdl.handle.net/10398/7148 Files in this item: 1
bechmann_raaballe_wp2000-5.pdf (492.9Kb) -
A Useful Way of Burning MoneyBechmann, Ken L.; Raaballe, Johannes (København, 2005)[More information][Less information]
Abstract: Firms pay out cash using both dividends and share repurchases. In many aspects these two means are similar, but one important difference is that dividends are generally taxed more heavily than share repurchases. Nevertheless firms persist in paying out large amounts in dividends. This paper provides an explanation for this dividend puzzle by developing a class of signaling models violating the "single-crossing" property in which information about the quality of the firm is asymmetric between the management and the shareholders. In these models a high-quality firm can always signal its quality by using share repurchases only. However, in certain cases share repurchases become costlier on the margin for a high-quality firm than for a low-quality imitator. In such cases, the high-quality firm signals most cost efficiently by means of a combination of share repurchases and taxable cash dividends financed by the issuance of new shares. Taxable cash dividends financed by the issuance of new shares then can be considered a positive kind of money burning whose role is to signal a firm’s high quality. The implications of the models are consistent with several important empirical facts about dividends and share repurchases. Thus, this paper’s main contribution is to examine a range of new signaling models that provides a role for taxable cash dividends and share repurchases and to derive their empirical implications. Key words: Dividends, Share Repurchases, Signaling, Single-Crossing Property, Money Burning JEL Classification: G35, D82 URI: http://hdl.handle.net/10398/7156 Files in this item: 1
ken_bechmann_wp_elektronisk_samlet.pdf (203.9Kb)
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