Abstract
We investigate shareholder wealth effects of stock dividends using a unique dataset from Oman in which many market frictions that are used to explain the stock dividend announcement effect are either absent or limited. We find a positive stock market reaction to stock dividend distributions. We also find that firms that distribute stock dividends experience favorable changes in operating performance during the seven-year period around the stock dividend distribution. Our results suggest that stock dividends are used primarily to signal future operating performance and to a lesser extent to reduce stock prices to an optimal trading range.
Original language | English |
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Pages (from-to) | 66-81 |
Number of pages | 16 |
Journal | Journal of International Financial Markets, Institutions and Money |
Volume | 28 |
Issue number | 1 |
DOIs | |
Publication status | Published - Jan 2014 |
Keywords
- Bid-ask spread
- Market microstructure
- Signaling
- Stock dividends
- Trading range
ASJC Scopus subject areas
- Finance
- Economics and Econometrics