An empirical research on the relationships among cash dividend, earnings persistency, and stock return

Healy and Palepu (1988) found change of dividends contains information contents. However, Benartzi, Michaely, and Thaler (1997) had different perspectives. I am interested in exploring whether investors on stock markets in Taiwan consider that cash dividends contain information contents is due to the different points of view on whether changes of dividends have information contents. The empirical results in this study are summarized as follows: (1) cumulative abnormal returns for firms with cash dividend might not more than the firms without cash dividend. (2) announcements of cash dividends create significant cumulative abnormal returns after control over changes of stock dividends. (3) The cumulative abnormal returns in firms with low P/E ratio and with announcements of cash dividends are more significant after control over changes of stock dividends.