The value relevance and information content of cash and stock dividends in China

Dedman, Elisabeth; Jiang, Wei; Stark, Andrew

Abstract

Due to their unique institutional features, the Chinese stock markets provide an interesting experimental setting in which to examine how cash and stock dividends convey value-relevant information about future performance and future cash dividends. Applying market valuation equations and prediction models to a large sample of Chinese firms from 2003 to 2011 produces several interesting results. When cash dividends are not paid, then stock dividends are positively associated with firm value, and convey information about future cash dividends and future earnings. When cash dividends are paid, however, it is these that convey information about future cash dividends. Following the share tradability reform and convergence with International Financial Reporting Standards, the value relevance and information content of cash dividends are predicted and found to be stronger, while the value relevance of stock dividends weakens over the same time period. Our evidence suggests that, in a weak information environment, where management have limited control over cash dividend distributions, stock dividends play an important role as information conduits.

Citation

Dedman, E., Jiang, W., & Stark, A. (2017). The value relevance and information content of cash and stock dividends in China. European Journal of Finance, 23(7-9), 648-673. https://doi.org/10.1080/1351847x.2014.996658

• Journal Article Type: Article
• Acceptance Date: Jan 28, 2015
• Online Publication Date: Jan 28, 2015
• Publication Date: Jul 15, 2017
• Deposit Date: Mar 11, 2019
• Journal: The European Journal of Finance
• Print ISSN: 1351-847X
• Electronic ISSN: 1466-4364
• Publisher: Routledge
• Peer Reviewed: Peer Reviewed
• Volume: 23
• Issue: 7-9
• Pages: 648-673
• DOI: https://doi.org/10.1080/1351847x.2014.996658
• Keywords: dividends; market valuation; earnings prediction
• Public URL: https://nottingham-repository.worktribe.com/output/1625797
• Publisher URL: https://www.tandfonline.com/doi/pdf/10.1080/1351847X.2014.996658?needAccess=true
• Additional Information: Peer Review Statement: The publishing and review policy for this title is described in its Aims & Scope.; Aim & Scope: http://www.tandfonline.com/action/journalInformation?show=aimsScope&journalCode=rejf20