An empirical examination of the existence of a signaling value function for dividends

The purpose of this study is to address the reliability of dividend signals. To determine if dividend signals are followed by changes in earnings in a direction consistent with the signal, the dividend‐earning relationship is examined using both Granger tests of causality and nonparametric tests. Results are consistent with the hypothesis that dividend signals are followed by unanticipated changes in earnings in the subsequent two quarters.