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Dividends and the Value of the Firm: Evidence from the Australian Equity Market

Author

Listed:
  • Ray Ball

    (Australian Graduate School of Management, University of New South Wales.)

  • Philip Brown

    (Australian Graduate School of Management, University of New South Wales.)

  • Frank J. Finn

    (Department of Commerce, University of Queensland.)

  • R. R. Officer

    (Department of Accounting and Finance, Monash University.)

Abstract

A version of the Black and Scholes dividend yield experiment is conducted, with a view to determining whether there exists a preference for dividends versus capital gains. Using data from the 1960s the experiment reveals a relatively large relationship between dividend yields and risk-adjusted share returns, in the year subsequent to the payment of the dividend yields. The observed dividend effect is too large to be explained by major hypotheses concerning market-wide preferences for or against dividends.

Suggested Citation

  • Ray Ball & Philip Brown & Frank J. Finn & R. R. Officer, 1979. "Dividends and the Value of the Firm: Evidence from the Australian Equity Market," Australian Journal of Management, Australian School of Business, vol. 4(1), pages 13-26, April.
    • Handle: RePEc:sae:ausman:v:4:y:1979:i:1:p:13-26
    DOI: 10.1177/031289627900400102
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    References listed on IDEAS

    as
    1. Roll, Richard, 1977. "A critique of the asset pricing theory's tests Part I: On past and potential testability of the theory," Journal of Financial Economics, Elsevier, vol. 4(2), pages 129-176, March.
    2. Black, Fischer & Scholes, Myron, 1974. "The effects of dividend yield and dividend policy on common stock prices and returns," Journal of Financial Economics, Elsevier, vol. 1(1), pages 1-22, May.
    3. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
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    Cited by:

    1. Mian Sajid Nazir & Muhammad Musarrat Nawaz, 2012. "Corporate Payout Policy and Market Capitalization: Evidence from Pakistan," Journal of Economics and Behavioral Studies, AMH International, vol. 4(6), pages 331-343.
    2. Abdulkadir Abdulrashid Rafindadi & Abdulrashid Bello, 2019. "Is Dividend Payment of any Influence to Corporate Performance in Nigeria? Empirical Evidence from Panel Cointegration," International Journal of Economics and Financial Issues, Econjournals, vol. 9(2), pages 48-58.
    3. Sufian Radwan Almanaseer, 2019. "Dividend Policy and Share Price Volatility: Evidence from Jordan," Accounting and Finance Research, Sciedu Press, vol. 8(2), pages 1-75, May.
    4. Syed Akif Shah & Umara Noreen, 2016. "Stock Price Volatility and Role of Dividend Policy: Empirical Evidence from Pakistan," International Journal of Economics and Financial Issues, Econjournals, vol. 6(2), pages 461-472.
    5. Philip Brown & Terry Walter, 1986. "Ex-Dividend Day Behaviour of Australian Share Prices," Australian Journal of Management, Australian School of Business, vol. 11(2), pages 139-152, December.
    6. Kathryn E. Easterday & Pradyot K. Sen, 2023. "Another look at the dividend-price relationship in the accounting valuation framework," Review of Quantitative Finance and Accounting, Springer, vol. 61(3), pages 879-925, October.
    7. Paul Simshauser, 2022. "On dividends and market valuations of Australia’s listed electricity utilities: regulated vs. merchant," Working Papers EPRG2210, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    8. Simshauser, P., 2022. "On dividends and market valuations of Australia’s listed electricity utilities: regulated vs. merchant," Cambridge Working Papers in Economics 2229, Faculty of Economics, University of Cambridge.
    9. Duy T. Nguyen & Mai H. Bui & Dung H. Do, 2019. "The Relationship Of Dividend Policy and Share Price Volatility: A Case in Vietnam," Annals of Economics and Finance, Society for AEF, vol. 20(1), pages 123-136, May.
    10. Simshauser, Paul, 2023. "On dividend policy and market valuations of Australia’s listed electricity utilities: Regulated vs. merchant," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 696-715.
    11. Thomas J. Cook & Michael S. Rozeff, 1984. "Coskewness, Dividend Yield And Capital Asset Pricing," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 7(3), pages 231-241, September.
    12. Islam Mohammad Shahidul & Adnan Atm, 2019. "Dividend Practices in Listed Companies: Study on the Manufacturing Sector of Bangladesh," Management of Organizations: Systematic Research, Sciendo, vol. 81(1), pages 1-19, June.
    13. Linnenluecke, Martina K. & Chen, Xiaoyan & Ling, Xin & Smith, Tom & Zhu, Yushu, 2016. "Emerging trends in Asia-Pacific finance research: A review of recent influential publications and a research agenda," Pacific-Basin Finance Journal, Elsevier, vol. 36(C), pages 66-76.

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