Information Flow and Liquidity around Anticipated and Unanticipated Dividend Announcements

We study dividend announcements, conditioning on whether the timing of the announcement is anticipated. We find that liquidity deteriorates before (after) anticipated (unanticipated) announcements. We identify both timing and content effects and also contrast trading volume, price volatility, advers...

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Bibliographic Details
Published in:The Journal of business (Chicago, Ill.) Ill.), 2006-09, Vol.79 (5), p.2301-2336
Main Authors: Graham, John R., Koski, Jennifer L., Loewenstein, Uri
Format: Article
Language:English
Subjects:
Adverse selection
Anticipation
Asymmetry
Capital market
Dividends
Impact analysis
Information asymmetry
Information dissemination
Information processing
Investors
Liquidity
Price volatility
Stock prices
Stock returns
Studies
Trade
Trade volume
Volatility
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Summary:We study dividend announcements, conditioning on whether the timing of the announcement is anticipated. We find that liquidity deteriorates before (after) anticipated (unanticipated) announcements. We identify both timing and content effects and also contrast trading volume, price volatility, adverse selection, and price impact separately for anticipated and unanticipated events. Our results generally imply that news announcements reduce information asymmetry. An implication of our analysis is that market reactions around information events differ depending on whether an event’s timing is known in advance. Therefore, researchers should consider whether event timing is knownex antewhen studying news announcements.
ISSN:0021-9398
1537-5374
DOI:10.1086/505236