Earnings and Dividend Announcements: Is There a Corroboration Effect?

Authors

  • ALEX KANE,

  • YOUNG KI LEE,

  • ALAN MARCUS

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    • Kane and Marcus from Boston University and the National Bureau for Economic Research, and Lee from Boston University and the Korean Development Institute.


ABSTRACT

We examine abnormal stock returns surrounding contemporaneous earnings and dividend announcements in order to determine whether investors evaluate the two announcements in relation to each other. We find that there is a statistically significant interaction effect. The abnormal return corresponding to any earnings or dividend announcement depends upon the value of the other announcement. This evidence suggests the existence of a corroborative relationship between the two announcements. Investors give more credence to unanticipated dividend increases or decreases when earnings are also above or below expectations, and vice versa.

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