1. Dividend initiations and long-run IPO performance.
- Author
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How, Janice CY, Ngo, Kian, and Verhoeven, Peter
- Subjects
DIVIDENDS ,GOING public (Securities) ,CORPORATE finance ,CAPITAL market ,DEBT management ,CASH flow - Abstract
Dividend initiations are an economically significant event that has important implications for a firm’s future financial capacity. Given the market’s expectation of a consistent payout, managers of IPO firms must approach the initial dividend decision cautiously. We compare the long-run performance of IPO firms that initiated a dividend with that of similarly matched non-payers, and find robust results that firms which initiated a dividend perform significantly better up to five years after the initiation date. Further tests show that the post-initiation firm performance is explained mostly by dividend theory of signalling rather than free cash flow. [ABSTRACT FROM AUTHOR]
- Published
- 2011
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