Institutional shareholding and information content of dividend surprises: Re-examining the dynamics in dividend-reappearance era

Abu S. Amin, Shantanu Dutta, Samir Saadi, Premal P. Vora

Research output: Contribution to journalArticlepeer-review

20 Scopus citations

Abstract

We examine the role of institutional investors' investment horizon on the information content associated with dividend announcement surprises in the "dividend-reappearance era". We find that the presence of institutional investors negatively affects the announcement period cumulative abnormal return (CAR), which suggests that institutional investors reduce information content of dividend announcements. This result is primarily driven by the fact that institutional investors, especially the not-short-horizon investors, do not prefer dividend surprises - which leads to lower announcement period CAR. We do not find support for institutional investors' informed trading argument. Our study reveals that in order to understand the dynamics between institutional ownership and information content of dividend announcements, it is important to differentiate the institutional investors' investment horizons.

Original languageEnglish
Pages (from-to)152-170
Number of pages19
JournalJournal of Corporate Finance
Volume31
DOIs
StatePublished - Apr 1 2015

Keywords

  • Dividend announcements
  • Information content
  • Institutional investors' investment horizon

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