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Testing dividend signaling models

Bernhardt, Dan and Douglas, Alan and Robertson, Fiona (2005) Testing dividend signaling models. Journal of Empirical Finance, 12 (1). pp. 77-98. ISSN 0927-5398.

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This paper exploits a key monotonicity property common to dividend signaling models—the greater the rate that dividend income is taxed relative to capital gains income, the greater the value of information revealed by a particular dividend yield—to distinguish the hypothesis that dividends are used as a signaling device from the hypothesis that dividends contain information but are not used as Spencian signals. The monotonicity conditions are tested with robust nonparametric techniques. While the monotonic relationship predicted by signaling theory can be found, a more careful inspection reveals that it does not hold for different levels of the dividend signal, as required by signaling theory. This strongly suggests that existing signaling models cannot explain the dividend policy choices of firms.

Item Type:Article
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URLURL TypeDescription ItemWorking Paper
Alternate Title:Testing Dividend Signalling Models
Additional Information:© 2005 Elsevier B.V. Accepted 2 October 2003, Available online 24 March 2004.
Subject Keywords:Dividend signaling models; Monotonicity condition; Income
Issue or Number:1
Record Number:CaltechAUTHORS:20170828-144124675
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Official Citation:Dan Bernhardt, Alan Douglas, Fiona Robertson, Testing dividend signaling models, Journal of Empirical Finance, Volume 12, Issue 1, January 2005, Pages 77-98, ISSN 0927-5398, (
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:80864
Deposited By: Tony Diaz
Deposited On:28 Aug 2017 21:46
Last Modified:03 Oct 2019 18:35

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