Corporate Dividends and Seasoned Equity Issues: An Empirical Investigation




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    • Institut für Finanzmanagement, Universität Bern, Bern, Switzerland and the Graduate School of Business, University of Wisconsin-Madison, respectively. We have benefited from the detailed comments of an anonymous referee for this journal, David Mayers, the editor, and Dennis Sheehan. We would also like to thank Ramasastry Ambarish, Jay Brinkmann, Werner DeBondt, Dennis Logue, Wayne Mikkelson, Cynthia Quillen, Lemma Senbet, Henri Servaes, Howard Thompson, Joseph Williams, Marc Zenner, and the audience at a session of the 1988 Western Finance Association Meetings for helpful comments on earlier versions of this paper. We are grateful to David Dickens, Greg Kadlec, Chang-Soo Kim, and Harold Klagstad for research assistance.


This paper investigates whether managers rely on dividends to obtain a higher price in a stock offering and whether the stock price reaction to dividend and offering announcements justifies such a coordination. The evidence does not support either conjecture. Issuing firms are not more likely to pay or increase dividends than nonissuing forms. Moreover, there is little evidence that firms time stock offering announcements right after dividend declarations to benefit from the attendant information disclosure. The analysis of dividend and stock offering announcement effects suggests few if any benefits from linking dividend and stock offering announcements.