Information content of dividend changes: cash flow signalling, dividend clientele and free cash flow hypotheses / Norhayati Mohamed ... [et al.]
The study aims to identify the type of information that firms are trying to convey when they change dividend. The first step is to test the relationship between unexpected dividend changes and stock prices by employing the event study methodology. The next step is to evaluate the information content...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
Accounting Research Institute (ARI) & Faculty of Accountancy
2006
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| Online Access: | https://ir.uitm.edu.my/id/eprint/268/ |
| _version_ | 1848802305671954432 |
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| author | Mohamed, Norhayati Abdul Hamid, Mohamad Ali Md Nassir, Annuar Mohamed, Shamsher |
| author_facet | Mohamed, Norhayati Abdul Hamid, Mohamad Ali Md Nassir, Annuar Mohamed, Shamsher |
| author_sort | Mohamed, Norhayati |
| building | UiTM Institutional Repository |
| collection | Online Access |
| description | The study aims to identify the type of information that firms are trying to convey when they change dividend. The first step is to test the relationship between unexpected dividend changes and stock prices by employing the event study methodology. The next step is to evaluate the information content of dividend changes in the context of three hypotheses: the cash flow signalling hypothesis, the dividend clientele hypothesis and the free cash flow hypothesis.
Past explanation to the effect of dividend changes on stock prices is that
firms are signalling their current and/or future cash flow of the firm, or known
as the cash flow signalling hypothesis. Later studies have incorporated other
explanations, which are the dividend clientele hypothesis and the free cash
flow hypothesis. Regression analysis is applied to study the wealth effect of
dividend changes on stock prices and to test for the three hypotheses. The
effect of firm size on the relationship between dividend changes and stock
prices are also analysed by using total assets per share as the proxy variable
for firm size.
The findings show a significant relationship between unexpected dividend
changes and stock prices, which also constitute support for the cash flow
signalling hypothesis. Mixed support is found for the dividend clientele
hypothesis while strong support is found for the free cash flow hypothesis. Next, the finding on the size variable indicates that firm size affect the relationship
between unexpected dividend and stock prices; however, the relationship is not
significant. |
| first_indexed | 2025-11-14T21:21:14Z |
| format | Article |
| id | uitm-268 |
| institution | Universiti Teknologi MARA |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-14T21:21:14Z |
| publishDate | 2006 |
| publisher | Accounting Research Institute (ARI) & Faculty of Accountancy |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | uitm-2682017-09-21T04:15:06Z https://ir.uitm.edu.my/id/eprint/268/ Information content of dividend changes: cash flow signalling, dividend clientele and free cash flow hypotheses / Norhayati Mohamed ... [et al.] mar Mohamed, Norhayati Abdul Hamid, Mohamad Ali Md Nassir, Annuar Mohamed, Shamsher The study aims to identify the type of information that firms are trying to convey when they change dividend. The first step is to test the relationship between unexpected dividend changes and stock prices by employing the event study methodology. The next step is to evaluate the information content of dividend changes in the context of three hypotheses: the cash flow signalling hypothesis, the dividend clientele hypothesis and the free cash flow hypothesis. Past explanation to the effect of dividend changes on stock prices is that firms are signalling their current and/or future cash flow of the firm, or known as the cash flow signalling hypothesis. Later studies have incorporated other explanations, which are the dividend clientele hypothesis and the free cash flow hypothesis. Regression analysis is applied to study the wealth effect of dividend changes on stock prices and to test for the three hypotheses. The effect of firm size on the relationship between dividend changes and stock prices are also analysed by using total assets per share as the proxy variable for firm size. The findings show a significant relationship between unexpected dividend changes and stock prices, which also constitute support for the cash flow signalling hypothesis. Mixed support is found for the dividend clientele hypothesis while strong support is found for the free cash flow hypothesis. Next, the finding on the size variable indicates that firm size affect the relationship between unexpected dividend and stock prices; however, the relationship is not significant. Accounting Research Institute (ARI) & Faculty of Accountancy 2006-05 Article PeerReviewed text en https://ir.uitm.edu.my/id/eprint/268/1/AJ_NORHAYATI%20MOHAMAD%20MAR%2006.pdf Mohamed, Norhayati and Abdul Hamid, Mohamad Ali and Md Nassir, Annuar and Mohamed, Shamsher (2006) Information content of dividend changes: cash flow signalling, dividend clientele and free cash flow hypotheses / Norhayati Mohamed ... [et al.]. (2006) Malaysian Accounting Review <https://ir.uitm.edu.my/view/publication/Malaysian_Accounting_Review.html>, 5 (1). pp. 65-84. ISSN 1675-4077 https://mar.uitm.edu.my/ |
| spellingShingle | Mohamed, Norhayati Abdul Hamid, Mohamad Ali Md Nassir, Annuar Mohamed, Shamsher Information content of dividend changes: cash flow signalling, dividend clientele and free cash flow hypotheses / Norhayati Mohamed ... [et al.] |
| title | Information content of dividend changes: cash flow signalling, dividend clientele and free cash flow hypotheses / Norhayati Mohamed ... [et al.] |
| title_full | Information content of dividend changes: cash flow signalling, dividend clientele and free cash flow hypotheses / Norhayati Mohamed ... [et al.] |
| title_fullStr | Information content of dividend changes: cash flow signalling, dividend clientele and free cash flow hypotheses / Norhayati Mohamed ... [et al.] |
| title_full_unstemmed | Information content of dividend changes: cash flow signalling, dividend clientele and free cash flow hypotheses / Norhayati Mohamed ... [et al.] |
| title_short | Information content of dividend changes: cash flow signalling, dividend clientele and free cash flow hypotheses / Norhayati Mohamed ... [et al.] |
| title_sort | information content of dividend changes: cash flow signalling, dividend clientele and free cash flow hypotheses / norhayati mohamed ... [et al.] |
| url | https://ir.uitm.edu.my/id/eprint/268/ https://ir.uitm.edu.my/id/eprint/268/ |