A Survey Of Information Content of Dividends and the Markets Differential Reaction in Tehran Securities Exchange.

Subject Areas : Futurology

R.  Shabahang ¹ (ندارد)
M.  M. Norbakhsh ² (ندارد)

Received: 2015-01-13 Accepted : 2015-01-13 Published : 2006-06-22

Keywords: Dividend Signaling hypothesis, Non Forward Looking - Forward , information asymmetry,

Abstract :

Previous studies document that the stock market reacts to dividend changes (in industrial counteries).The signaling hypothesis suggests that the market reacts because dividend changes contain new informationabout future earnings.Some recent studies in these counteries find that dividend changes reflect mostlycurrent and past earning but not future eanings.This Article provides a model in which not all dividend changes contain new information about futureearnings. Some dividended decisions are (Non -forward - Looking) in that they simply reflect current andpast earnings. Other dividended decisions are Forward - Looking in that they reveal managers' newinformation about future earnings. The model helps identify the two types of dividend changes and preditsthat the market will respond further to Forward - looking diviend changes.By classifying dividend changes into the two groups, it is found that the market reacts further to Forward- looking dividend changes than to Non-forward-looking dividend changes, which is consistent withimplications of the above model. Therefore, the article not only provides evidence for the signalinghypothesis in Tehran securities exchange but also helps explain the weak and mixed results of previousstudies (in industrial counteries) that do not distinguish between the two types of dividend changes.