Costly Dividend Signaling: The Case of Loss Firms with Negative Cash Flows
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Author(s)
Joos, Peter
Plesko, George
Date Issued
December 10, 2004
Series/Report no.
MIT Sloan School of Management Working Paper;Costly Dividend Signaling: The Case of Loss Firms with Negative Cash Flows
Abstract
We examine the dividend-signaling hypothesis in a sample of firms for which dividend increases are particularly
costly, namely loss firms with negative cash flows. When compared to loss firms with positive cash flows, we find
the predictive power of dividend increases for future return on assets to be greater for loss firms with negative cash
flows, consistent with the predictive power of the dividend signal being stronger when its cost is higher. Our results
provide support for the dividend-signaling hypothesis and have broader implications since loss firms comprise a
large and increasing share of publicly-traded firms.
Subjects
dividends
dividend signalling
losses
Persistent DSpace Link
