publication . Article . 2010

Does the Order Between Dividend Payment and New Stock Issuance Matter to Stock Price? — Evidence from Taiwan

Mia Twu;
Open Access
  • Published: 01 Jan 2010 Journal: Review of Pacific Basin Financial Markets and Policies, volume 13, issue 3, pages 363-380
Abstract
<jats:p> I argue that paying dividends before issuing new stock can increase the stock price in the case when firms announce dividend payments and new stock issuance contemporaneously. It enables issuing firms to disentangle the agency problem of paying dividends by newly-raised funds from dividend information for new stock issuances. I employ the seasoned offerings of Taiwan listed firms as the sample, because of their practice of paying dividends once a year. The conditional event study strongly supports this argument and explains why previous studies fail to detect the information conveyed by dividends for new stock issuances. </jats:p>
Subjects
free text keywords: Dividends, new stock issuance, agency problem, signaling, price reaction, jel:G1, jel:G2, jel:G3, Economics and Econometrics, Finance, Stock exchange, Economics, Non-qualified stock option, Common stock, Dividend policy, Financial economics, Restricted stock, Dividend, Market maker, business.industry, business, Stock market bubble
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