The dividend initiation decision of newly public firms: some evidence on signaling with dividends

Document Type

Article

Publication Title

Journal of Financial and Quantitative Analysis

Abstract

We track the dividend initiation (DI) decisions from a sample of 6,588 firms that went public during the period 1979-2005 and find that 873 of them initiated dividends. Our primary objective is to determine whether information signaling can explain the DI decision. We find that variables suggested by the dividend-signaling models of John and Williams (1985) and Allen, Bernardo, and Welch (2000) are significant determinants of the DI decision and the associated announcement-period stock price effect. We also find support for the residual, agency, tax, clientele, transaction costs, catering, and life-cycle explanations of dividend policy.

Publication Date

1-4-2012

Publisher

Cambridge University Press

Volume

Vol.47

Issue

Iss.2

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