The Information Content of Dividend Announcements: The Case of Taiwan

Whether or not cash dividend announcements have information is still a puzzling issue. This paper investigates the information content of cash dividend announcements of listed companies in Taiwan, which has different investors' composition and preference from U.S. and other Asian countries. In this study, the theoretical impact of unexpected cash dividend on return is developed. Then the empirical tests are conducted based on the cash dividend announcements from January 1987 to December 1997 in Taiwan. The results indicate that there exists evidence to support the information content hypothesis. However, when a more general specification that considers the interaction effect between cash dividend and earnings announcements is observed, empirical result suggests that the existence of a corroborative relationship between the cash dividend and earnings announcements.