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The Effect of Dividend Changes on Stock and Bond Prices

Upinder S. Dhillon and Herb Johnson
The Journal of Finance
Vol. 49, No. 1 (Mar., 1994), pp. 281-289
Published by: Wiley for the American Finance Association
DOI: 10.2307/2329145
Stable URL: http://www.jstor.org/stable/2329145
Page Count: 9
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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.
The Effect of Dividend Changes on Stock and Bond Prices
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Abstract

This study examines stock and bond price reactions to dividend changes. The positive stock market response to dividend increases has several potential explanations, two of the more commonly discussed being information content and wealth redistribution between stockholders and bondholders. The evidence presented supports the wealth redistribution hypothesis but does not rule out the information content hypothesis. Typically we find that the bond price reaction to announcements of large dividend changes is opposite to the stock price reaction. Our results differ from those of Handjinicolaou and Kalay.

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