Stock market reactions to dividend and earnings announcements in a tax-free environment
Journal Publication ResearchOnline@JCUAbstract
This paper investigates the stock market reactions to dividend and earnings announcements for firms listed in the United Arab Emirates (UAE), where there is no tax on dividend income or capital gains. This tax-free setting allows us to examine the tax-based signalling hypothesis, which holds that a change in dividends does not offer important information when dividend income is not taxed. Contrary to the tax-based signalling theory, we find a positive (negative) price reaction to dividend initiations and increases (dividend omissions and decreases). We further examine the signalling hypothesis, which proposes that dividends convey information about firms' future earnings. We find that the size of the dividend increases or decreases does not predict future earnings.
Journal
International Finance
Publication Name
International Finance
Volume
22
ISBN/ISSN
1468-2362
Edition
N/A
Issue
2
Pages Count
19
Location
N/A
Publisher
Wiley-Blackwell
Publisher Url
N/A
Publisher Location
N/A
Publish Date
N/A
Url
N/A
Date
N/A
EISSN
N/A
DOI
10.1111/infi.12331