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Abstract: An Exploration of Nondissipative Dividend-Signaling Structures

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  • Bhattacharya, Sudipto

Abstract

What I have attempted to do in this paper and a companion paper [1] on dividend-signaling is to delineate two “polar cases” of signaling in which firms either can or cannot (at all) directly communicate the ex-post profitability of their business without moral hazard. In this paper, we assume that they can, and signaling through dividends or earnings forecasts “merely” serves to bring forward the timing of communication of insiders' expectation of profitability to the outside market. The model is “nondissipative” because the incentivestructure that leads to self-selection using the signal is based on market value revisions which are themselves based on the discrepancy between the signal and the ex-post indicator, not on any exogenous or “third party” costs, unlike the model in the companion paper [1].

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  • Bhattacharya, Sudipto, 1979. "Abstract: An Exploration of Nondissipative Dividend-Signaling Structures," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 14(4), pages 667-668, November.
    • Handle: RePEc:cup:jfinqa:v:14:y:1979:i:04:p:667-668_00
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    Cited by:

    1. Ullah, Barkat, 2020. "Signaling value of quality certification: Financing under asymmetric information," Journal of Multinational Financial Management, Elsevier, vol. 55(C).
    2. Seyed Alireza Athari, 2021. "The effects of institutional settings and risks on bank dividend policy in an emerging market: Evidence from Tobit model," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 4493-4515, July.
    3. Chen, Yongming & Li, Hui, 2023. "The dual purpose of insider trading: Signaling quality and battling shorts," Finance Research Letters, Elsevier, vol. 55(PB).

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