You are not currently logged in.
Access JSTOR through your library or other institution:
If You Use a Screen ReaderThis content is available through Read Online (Free) program, which relies on page scans. Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Dividend Changes and Security Prices
J. Randall Woolridge
The Journal of Finance
Vol. 38, No. 5 (Dec., 1983), pp. 1607-1615
Stable URL: http://www.jstor.org/stable/2327590
Page Count: 9
You can always find the topics here!Topics: Dividends, Preferred stock, Common stock, Standard deviation, Security prices, Financial securities, Securities markets, Debt, Finance, Securities returns
Were these topics helpful?See somethings inaccurate? Let us know!
Select the topics that are inaccurate.
Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Preview not available
This paper analyzes the effect of unexpected dividend changes on the values of common stock, preferred stock, and bonds. Two potential effects are identified: a wealth transfer effect and a signalling effect. Previous studies have shown that positive (negative) dividend change announcements produce positive (negative) common stock price changes. Whereas these findings have been attributed to the signalling aspect of dividends, they are also consistent with the wealth transfer hypothesis. Based on the announcement day returns of common and preferred stock and bond holders, it is demonstrated that the primary factor influencing security returns in response to dividend changes is market signalling. A wealth transfer effect is not necessarily ruled out, but if it exists it is dominated by the signalling effect.
The Journal of Finance © 1983 American Finance Association