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Alternative event study methodology for detecting dividend signals in the context of joint dividend and earnings announcements

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Abstract:

Abstract

Friction models are used to examine the market reaction to the simultaneous disclosure of earnings and dividends in a thin-trading environment. Friction modelling, a procedure using maximum likelihood estimation, can be used to replace both the market model and restricted least-squares regression in event studies where there are two quantifiable variables and a number of possible interaction effects associated with the news that constitutes the study's event. The results indicate that the dividend signal can be separated from the earnings signal.

Keywords: C51; D46; Dividend signalling; Event study; Friction model; G14; Joint announcements; Market model; N27

Document Type: Research Article

DOI: https://doi.org/10.1111/j.1467-629X.2008.00289.x

Affiliations: College of Business and Economics, University of Canterbury, Christchurch, 8041, New Zealand

Publication date: 2009-06-01

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