Signaling Managerial Optimism through Stock Dividends and Stock Splits: A Reexamination of the Retained Earnings Hypothesis

2001 ◽  
Author(s):  
Dean Crawford ◽  
Diana R. Franz ◽  
Gerald J. Lobo
Keyword(s):  
Stock Splits ◽  
Managerial Optimism ◽  
Stock Dividends ◽  
Retained Earnings

Signaling Managerial Optimism through Stock Dividends and Stock Splits: A Reexamination of the Retained Earnings Hypothesis

2005 ◽  
Vol 40 (3) ◽  
pp. 531-561 ◽  
Author(s):  
Dean Crawford ◽  
Diana R. Franz ◽  
Gerald J. Lobo
Keyword(s):  
Stock Splits ◽  
Apparent Inconsistency ◽  
Managerial Optimism ◽  
Stock Distributions ◽  
Stock Dividends ◽  
Retained Earnings

AbstractThe retained earnings hypothesis predicts that stock distributions accounted for by reducing retained earnings are a more credible signal of managerial optimism than stock distributions that do not reduce retained earnings. This study examines the costs of false signaling that are a necessary pre-condition for the hypothesis and finds them to be generally very small, calling the validity of the hypothesis into question for most firms. However, prior studies report broad-based market evidence consistent with the hypothesis. To resolve this apparent inconsistency, the study replicates and extends tests of the retained earnings hypothesis contained in three prior studies, and shows that the findings in support of the retained earnings hypothesis can be attributed to specification and measurement choices that bias the results in favor of the hypothesis. The support for the retained earnings hypothesis is weaker when the sources of the bias are removed. However, some support for the hypothesis remains for a limited set of distributing firms.

Why Indian firms issue stock distributions

2015 ◽  
Vol 41 (7) ◽  
pp. 658-672
Author(s):  
H. Kent Baker ◽  
Sujata Kapoor
Keyword(s):  
Survey Methodology ◽  
Stock Exchange ◽  
Strong Support ◽  
Mail Survey ◽  
Stock Splits ◽  
Content Type ◽  
Prior Literature ◽  
Stock Distributions ◽  
Stock Dividends ◽  
Retained Earnings

Purpose – The purpose of this paper is to investigate the opinions of managers of Indian firms on stock splits and bonus shares (stock dividends) and relate them to explanations for stock distributions identified in the prior literature. Design/methodology/approach – The authors use descriptive statistics from a mail survey to the company secretaries of 500 firms listed on the National Stock Exchange of India to elicit their responses about statements involving stock splits and bonus shares. Findings – The survey evidence shows that among the competing motives for stock splits, the liquidity hypothesis receives the highest level of support followed by the attention-getting variant of the signaling hypothesis, signaling, and the preferred trading range hypotheses. Regarding bonus shares, respondents express strong support for the retained earnings, liquidity, and signaling hypotheses but lesser support for the cash substitution and preferred trading range hypotheses. Research limitations/implications – The survey evidence provides new insights into the stated motivations for stock distributions, especially bonus shares, among Indian firms but the ability to generalize the results is tempered by the relatively small number of respondents. This limits the ability to test for statistically significant differences between the various competing hypotheses. Hence, the results are suggestive rather than definitive. Practical implications – The survey evidence suggests that no single explanation dominates all others for issuing stock splits or bonus shares in India. Thus, managers have multiple reasons for engaging in stock distributions. Originality/value – Few studies use survey methodology to examine Indian dividend policy. Given the dearth of survey evidence on stock distributions among Indian firms, this study not only updates the limited evidence on stock splits but also provides the first survey evidence about managerial views on bonus shares.

Stock Dividends, Stock Splits, and Signaling

1990 ◽  
Vol 45 (3) ◽  
pp. 857-879 ◽  
Author(s):  
MAUREEN MCNICHOLS ◽  
AJAY DRAVID
Keyword(s):  
Stock Splits ◽  
Stock Dividends

scholarly journals The Impact of Stock Dividends and Stock Splits on Shares’ Prices: Evidence from Egypt

2017 ◽  
Vol 6 (4) ◽  
pp. 96 ◽  
Author(s):  
Osama Abd ElKhalek El Ansary ◽  
Mervat Hussien El-Azab
Keyword(s):  
Stock Prices ◽  
Positive Impact ◽  
Stock Exchange ◽  
Investment Decision ◽  
Price Volatility ◽  
Stock Splits ◽  
Stock Split ◽  
Corporate Actions ◽  
Stock Dividends ◽  
The Impact

This research aims to examine the effect of two types of corporate actions,“Stock Split” and “Stock Dividends”, on the shares’ prices, liquidity changes, and price volatility; and to investigate the efficiency of the Egyptian stock market in response to the announcement of the corporate actions. The research provides the investors with a scientific tool to predict and explain changes in stock prices in response to announced corporate actions and to improve their investment decision-making process.The objective is to investigate whether the two actions collectively or independently have a positive impact on the prices of the related stocks listed on the Egyptian Stock Exchange (EGX), and assess the similarities and dissimilarities between their individual impacts.We applied the “Event Study” approach to measure the impact of the stock splits and stock dividends announcement on the stock prices through measuring the cumulated average abnormal return (CAAR) resulted from events to assess their impact on the stock performance around the announcement day (for a period of 30 prior and 30 days post announcement) as applied before by Terhi (2011).  The analysis concluded that the announcement of both of stock split and stock dividend has a positive impact on stock prices. This positive impact drove the authors to test the efficiency of EGX in respect of the impact of the announcement the corporate actions to the public investors. A correlation analysis is performed to reflect this impact. 

Sign in / Sign up

Export Citation Format

Share Document