DIVIDEND POLICY AND STOCK ACQUISITION ANNOUNCEMENT RETURNS: A TEST OF ASYMMETRIC INFORMATION THEORY

2019 ◽  
Vol 42 (1) ◽  
pp. 115-145 ◽  
Author(s):  
Aymen Turki
Keyword(s):  
Information Theory ◽  
Asymmetric Information ◽  
Dividend Policy ◽  
Announcement Returns ◽  
Stock Acquisition

scholarly journals Dividend Policy under Asymmetric Information

1985 ◽  
Vol 40 (4) ◽  
pp. 1031-1051 ◽  
Author(s):  
MERTON H. MILLER ◽  
KEVIN ROCK
Keyword(s):  
Asymmetric Information ◽  
Dividend Policy

Investigating the Relationship between Asymmetric Information and Dividend Policy in Iranian Industrial Companies

2013 ◽  
Author(s):  
Seyedhossein Naslmosavi ◽  
Mohammadghorban Mehri ◽  
Mohammed Sangiru Umar ◽  
Danjuma Shehu Ibrahim
Keyword(s):  
Asymmetric Information ◽  
Dividend Policy ◽  
Industrial Companies ◽  
The Relationship

Information asymmetry and dividend policy of Sarbanes-Oxley Act

2020 ◽  
Vol 47 (6) ◽  
pp. 1507-1532
Author(s):  
Mostafa Harakeh ◽  
Ghida Matar ◽  
Nagham Sayour
Keyword(s):  
Asymmetric Information ◽  
Information Asymmetry ◽  
Financial Economics ◽  
Dividend Policy ◽  
Potential Effect ◽  
Control Group ◽  
Reverse Causality ◽  
Publicly Traded ◽  
Content Type ◽  
Sarbanes Oxley

PurposeThe literature of financial economics documents a causal relationship between the level of information asymmetry in the firm and its dividend policy. Nevertheless, this relationship suffers endogeneity problems arising from reverse causality and omitted variable bias. The purpose of this study is to examine how the dividend policy reacts to changes in asymmetric information in an exogenous research setting.Design/methodology/approachTo overcome endogeneity concerns, the authors employ the enactment of the Sarbanes-Oxley Act (SOX) in the US in 2002 as a source of an exogenous variation in the level of information asymmetry to study the potential effect that this variation might have on the dividend policy. In doing so, we utilize a difference-in-differences research design, in which the treatment group is US publicly traded firms that were exposed to the policy and the control group is publicly traded companies in the UK where SOX was not enacted. Both countries have similar institutional settings and enforcement of laws, which makes them comparable in this research context.FindingsThe authors’ findings show that, compared to UK companies, US firms increase their dividend payments following a reduction in asymmetric information as a result of the SOX enactment.Originality/valueThe study contributes to the literature of financial economics by showing that policy makers can mitigate agency conflicts and protect shareholders by improving the corporate information environment and reducing asymmetric information.

Asymmetric Information and Dividend Policy

2008 ◽  
Vol 37 (4) ◽  
pp. 673-694 ◽  
Author(s):  
Kai Li ◽  
Xinlei Zhao
Keyword(s):  
Asymmetric Information ◽  
Dividend Policy

Stock acquisitions, investor recognition, and announcement returns

2016 ◽  
Vol 42 (6) ◽  
pp. 518-535
Author(s):  
Adam Y.C. Lei ◽  
Huihua Li
Keyword(s):  
Mergers And Acquisitions ◽  
Cost Reduction ◽  
Design Methodology ◽  
Direct Evidence ◽  
Institutional Ownership ◽  
Target Type ◽  
Content Type ◽  
Announcement Returns ◽  
Shadow Cost ◽  
Stock Acquisition

Purpose – The purpose of this paper is to test the hypothesis that relative to a cash acquisition, a stock acquisition would increase the bidder’s investor base and lower Merton’s (1987) shadow cost, which in turn contributes positively to the bidder announcement return. Design/methodology/approach – Using the number of registered shareholders and measures of institutional ownership as the proxies for investor base and investor recognition, this paper compares their changes and the changes in shadow cost between bidders using different methods of payment. The authors examine the relation between the shadow cost reduction and bidder announcement return in a multivariate framework. Findings – This paper finds that given the target type, bidders using stocks experience significantly larger increases in their investor bases and investor recognition than bidders using cash. Additionally, only bidders using stocks experience significant decreases in their shadow costs. In a multivariate framework, the change in the shadow cost has a negative and significant effect on the bidder announcement return in the sample of stock acquisitions and the subsample of bidders using stocks to acquire private targets. These findings support the authors’ hypothesis and suggest that the less established bidders acquiring private targets in particular benefit from the shadow cost reduction. Originality/value – This paper provides the direct evidence that investor recognition matters in mergers and acquisitions. The findings also provide a complementary explanation for the documented positive bidder returns when bidders use stocks to acquire private targets.

Financial Turmoil and Asymmetric Information Theory: Evidence from the e-Mid Platform

2010 ◽  
pp. 29-40 ◽  
Author(s):  
Claudio Porzio ◽  
Francesca Battaglia ◽  
Antonio Meles ◽  
Maria Grazia Starita
Keyword(s):  
Information Theory ◽  
Asymmetric Information
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