Stock market reactions to dividend and earnings announcements in a tax-free environment
Document Type
Article
Source of Publication
International Finance
Publication Date
1-1-2019
Abstract
© 2018 John Wiley & Sons Ltd This paper investigates the stock market reactions to dividend and earnings announcements for firms listed in the United Arab Emirates (UAE), where there is no tax on dividend income or capital gains. This tax-free setting allows us to examine the tax-based signalling hypothesis, which holds that a change in dividends does not offer important information when dividend income is not taxed. Contrary to the tax-based signalling theory, we find a positive (negative) price reaction to dividend initiations and increases (dividend omissions and decreases). We further examine the signalling hypothesis, which proposes that dividends convey information about firms' future earnings. We find that the size of the dividend increases or decreases does not predict future earnings.
DOI Link
ISSN
Publisher
Blackwell Publishing Ltd
Volume
22
Issue
2
First Page
241
Last Page
259
Disciplines
Business
Scopus ID
Recommended Citation
Tee, Kienpin and Tessema, Abiot M., "Stock market reactions to dividend and earnings announcements in a tax-free environment" (2019). All Works. 3206.
https://zuscholars.zu.ac.ae/works/3206
Indexed in Scopus
yes
Open Access
no