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Do what you did four quarters ago: Trends and implications of quarterly dividends

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  • Andres, Christian
  • Hofbaur, Ulrich

Abstract

By analyzing the inter-temporal structure of quarterly dividends, we show that as more firms announce dividend increases exactly every four quarters, dividend policy has become more persistent and more predictable. Recently, nearly 60% of all dividend increases have been announced in four-quarter cycles. Valuation, earnings stability, and size are positively related to the propensity to adopt four-quarter cycles. More importantly, we provide evidence that this structure is incorporated into market participants' expectations about future dividend announcements. These findings may provide an explanation for two phenomena described in the literature: the declining information content of dividends and the higher degree of dividend smoothing.

Suggested Citation

  • Andres, Christian & Hofbaur, Ulrich, 2017. "Do what you did four quarters ago: Trends and implications of quarterly dividends," Journal of Corporate Finance, Elsevier, vol. 43(C), pages 139-158.
    • Handle: RePEc:eee:corfin:v:43:y:2017:i:c:p:139-158
    DOI: 10.1016/j.jcorpfin.2017.01.003
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    3. Ebenezer Asem & Shamsul Alam, 2021. "The abnormal return associated with consecutive dividend increases," The European Journal of Finance, Taylor & Francis Journals, vol. 27(3), pages 222-238, February.
    4. Asem, Ebenezer, 2022. "Are dividend changes exploited in the equity market?," The Quarterly Review of Economics and Finance, Elsevier, vol. 85(C), pages 125-133.
    5. Ebenezer Asem & Vishaal Baulkaran & Pawan Jain & Mark Sunderman, 2022. "Are institutional investors informed? The case of dividend changes for REITS and Industrial Firms," Review of Quantitative Finance and Accounting, Springer, vol. 58(4), pages 1685-1707, May.
    6. Drienko, Jo & Khorsand, Bardia, 2023. "Dividend hibernation and future earnings: When no dividend news is good news," Journal of Corporate Finance, Elsevier, vol. 83(C).
    7. Charl de Villiers & Diandian Ma & Ana Marques, 2024. "Corporate social responsibility disclosure, dividend payments and firm value – Relations and mediating effects," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(1), pages 185-219, March.

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    More about this item

    Keywords

    Quarterly dividends; Serial dividend changes; Information content of dividends; Market expectations; Speed of adjustment;
    All these keywords.

    JEL classification:

    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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