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    What drives special dividend announcements?: An examination of macro perspectives

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    Fulltext not available
    Authors
    Hu, May
    Date
    2012
    Type
    Conference Paper
    
    Metadata
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    Citation
    Hu, M. 2012. What drives special dividend announcements?: An examination of macro perspectives, in Proceedings of the 2012 FMA European Conference, Jun 6-8 2012, pp. 1-48. Istanbul, Turkey: Financial Management.
    Source Title
    Proceedings of 2012 FMA European Conference
    Source Conference
    2012 FMA European Conference
    Additional URLs
    http://www.fma.org/Istanbul/IstanbulProgram.htm
    School
    Department of Finance and Banking
    URI
    http://hdl.handle.net/20.500.11937/22569
    Collection
    • Curtin Research Publications
    Abstract

    This paper investigates macro-level explanations for why firms pay special dividends. The evidence shows that both market conditions and stages of the business cycle affect the propensity and abnormal returns of special dividend announcements. However, business cycle variations have economically larger impact on these events. Firms are more likely to announce special dividends in market or economic downturns rather than upturns. They tend to use additional cash for business growth in expansions and distribute it to reduce agency costs in contractions. The signalling effect of special dividend distributions is stronger and the companies with these announcements are better performers in recessions. This research sheds light on the reasons why we observe corporate events happening in waves and enhances the understanding of why firms disburse extra cash dividends at the aggregate level.

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