Working Paper: NBER ID: w1248
Authors: Alex Kane; Young Ki Lee; Alan J. Marcus
Abstract: We examine abnormal stock returns surrounding contemporaneous earnings and dividend announcements in order to determine whether investors evaluate the two announcements in relation to each other.We find that there is a statistically significant interaction effect.The abnormal return corresponding to any earnings or dividend announcement depends upon the value of the other announcement. This evidence suggests the existence of a corroborative relationship between the two announcements. Investors give more credence to unanticipated dividend increases or decreases when earnings are also above or below expectations, and vice versa.
Keywords: Earnings announcements; Dividend announcements; Abnormal returns; Corroboration effect
JEL Codes: G14; G12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| unanticipated dividend changes (G35) | stock returns (G12) |
| earnings announcements (G14) | stock returns (G12) |
| unanticipated dividend changes + earnings announcements (G35) | stock returns (G12) |
| earnings announcements (G14) | unanticipated dividend changes (G35) |
| unanticipated dividend changes (G35) | earnings announcements (G14) |
| interaction of dividend and earnings announcements (G35) | stock returns (G12) |