TY - JOUR
T1 - Dividend hibernation and future earnings
T2 - When no dividend news is good news
AU - Drienko, Jo
AU - Khorsand, Bardia
N1 - Publisher Copyright:
© 2023 Elsevier B.V.
PY - 2023/12
Y1 - 2023/12
N2 - Firms frequently enter dividend hibernation, periods during which dividends remain unchanged for consecutive quarters. We employ a dividend event framework to show that, compared to non-hibernating firms, hibernators experience higher unexpected future earnings growth for up to five years by reducing underinvestment. We construct an index of adverse selection measures and find that hibernating firms are more opaque, indicating that the information gap between insiders and outsiders widens when there is no change in dividends. Extended hibernation episodes increase the opaqueness, while dividend changes after prolonged periods of fixed dividends reduce the information gap more promptly.
AB - Firms frequently enter dividend hibernation, periods during which dividends remain unchanged for consecutive quarters. We employ a dividend event framework to show that, compared to non-hibernating firms, hibernators experience higher unexpected future earnings growth for up to five years by reducing underinvestment. We construct an index of adverse selection measures and find that hibernating firms are more opaque, indicating that the information gap between insiders and outsiders widens when there is no change in dividends. Extended hibernation episodes increase the opaqueness, while dividend changes after prolonged periods of fixed dividends reduce the information gap more promptly.
KW - Dividend signaling theory
KW - Information asymmetry
KW - Payout policy
UR - http://www.scopus.com/inward/record.url?scp=85175609631&partnerID=8YFLogxK
U2 - 10.1016/j.jcorpfin.2023.102502
DO - 10.1016/j.jcorpfin.2023.102502
M3 - Article
SN - 0929-1199
VL - 83
JO - Journal of Corporate Finance
JF - Journal of Corporate Finance
M1 - 102502
ER -