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Lookup NU author(s): Dr Shams PathanORCiD
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© The Author(s) 2015. Using a sample of US listed firms over the 1989–2012 period, we find that financially constrained dividend-increasing firms experience superior short-run abnormal stock returns, but suffer worse operating performance compared to similar unconstrained firms. More specifically, constrained firms in more competitive industries realize poorer long-run and operating performance. Likewise, constrained firms that increase dividends during the financial crisis also deliver inferior post-dividend-increase long-run return than do unconstrained firms. We also find evidence that constrained firms show worse stock market reaction to new equity issue announcements following dividend increase, but display a positive market response if they potentially have high investment growth opportunities. Our results are robust to alternative financial constraint proxies and abnormal return measures.
Author(s): Pathan S, Faff R, Mendez CF, Masters N
Publication type: Article
Publication status: Published
Journal: Australian Journal of Management
Year: 2016
Volume: 41
Issue: 3
Pages: 484-507
Print publication date: 01/08/2016
Online publication date: 09/07/2016
Acceptance date: 02/04/2016
ISSN (print): 0312-8962
ISSN (electronic): 1327-2020
Publisher: SAGE Publications Ltd
URL: https://doi.org/10.1177/0312896214557835
DOI: 10.1177/0312896214557835
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