The information content of dividend changes

In this study, the open empirical question as to whether or not dividends contain information is investigated. The study involves 200 stocks and 376 dividend announcements over the 1971 to 1977 period; measures of unexpected dividends are related to measures of abnormal returns for dividend changing stocks. This study is important for three reasons: A tested ex ante dividend expectational model is used; The analysis is centered on daily, as opposed to monthly, returns; and, The influence of earnings on stock price is controlled explicitly. The evidence indicates that abnormal stock returns vary in sign with unexpected dividends. The results are consistent with the hypothesis that dividends contain information.