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Dividend Policy And Stock Acquisition Announcement Returns: A Test Of Asymmetric Information Theory

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  • Aymen Turki

Abstract

This study examines 711 U.S. stock‐based acquisitions announced between 1985 and 2013 to analyze the relation between the acquirer's dividend policy and its stock returns when the acquisition is announced. Asymmetric information theory suggests that the lower the level of uncertainty about the acquirer's value, the smaller the acquirer's price drop when a stock‐based acquisition is announced. In support of this theoretical prediction, the current study identifies less negative acquirer stock returns around the announcement of stock acquisitions initiated by dividend‐paying firms compared with those initiated by non‐dividend‐paying firms.

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  • Aymen Turki, 2019. "Dividend Policy And Stock Acquisition Announcement Returns: A Test Of Asymmetric Information Theory," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 42(1), pages 115-145, March.
    • Handle: RePEc:bla:jfnres:v:42:y:2019:i:1:p:115-145
    DOI: 10.1111/jfir.12164
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    Cited by:

    1. Rebecca Abraham & Venkata Mrudula Bhimavarapu & Zhi Tao & Shailesh Rastogi, 2023. "The Influence of Cash Ownership on Financial Performance: An Examination of Disruptors and Acquirers," JRFM, MDPI, vol. 16(3), pages 1-22, March.
    2. Arman Gülnur & Nikolaos Antypas, 2023. "Favourable funding conditions: friend or foe of shipping M&As?," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 25(4), pages 728-754, December.
    3. Benjamin Amoah, 2024. "The story of dividend payment and corporate cash flow in Ghana," African Development Review, African Development Bank, vol. 36(1), pages 30-40, March.
    4. Tampakoudis, Ioannis & Nerantzidis, Michail & Eweje, Gabriel & Leventis, Stergios, 2022. "The impact of gender diversity on shareholder wealth: Evidence from European bank M&A," Journal of Financial Stability, Elsevier, vol. 60(C).

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