2002/07/01 by Gustavo Grullon, Roni Michaely, Bhaskaran Swaminathan · 1,081 citations
Business, Management and Accounting · Mathematics · Psychology · #Business #Corporate Finance and Governance #Dividend #Dividend policy #Economics #Finance #Financial Reporting and Valuation Research #Mathematical analysis #Mathematics #Maturity (psychological) #Psychology #Sign (mathematics) #Working Capital and Financial Performance
paper · doi:10.1086/339889
published in The Journal of Business 75(3), 387-424 (University of Chicago Press)
openalex publication_date 2002/07/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/01
Firms that increase (decrease) dividends experience a significant decline (increase) in their systematic risk. The dividend-increasing firms do not increase their capital expenditure and experience a decline in profitability in the years after the dividend change. The positive market reaction to a dividend increase is significantly related to the subsequent decline in systematic risk. In the long run, the dividendincreasing firms with the largest decline in systematic risk also experience the largest increase in price over the next three years, suggesting that the market reaction to dividend changes may not incorporate the full extent of the decline in the cost of capital associated with dividend changes.