The Information Content of Dividend Surprises: Evidence from Germany


  • Christian Andres,

  • Andre′ Betzer,

  • Inga van den Bongard,

  • Christian Haesner,

  • Erik Theissen

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    • The first author is from the WHU – Otto Beisheim School of Management, Vallendar, Germany; the second author is from the BUW – Schumpeter School of Business and Economics, Wuppertal, Germany; the third author is from the University of Mannheim, Germany; the fourth author is from WHU – Otto Beisheim School of Management, Vallendar, Germany; and the fifth author is from the University of Mannheim, Germany, and the Centre for Financial Research, Cologne, Germany. We would like to thank an anonymous referee, Andrew Stark (the Editor), seminar participants at the University of Mannheim, participants of the 2010 meetings of the European Financial Management Association in Aarhus, the 2012 AFFI, 29th Spring International Conference in Strasbourg, and participants of the 2012 JBFA capital markets conference in Frankfurt, Germany for helpful comments and suggestions. (Paper received December, 2011; revised version accepted May, 2013).

Address for correspondence: Erik Theissen, University of Mannheim, Schloss, 68131 Mannheim, Germany.



This paper reconsiders the issue of share price reactions to dividend announcements. We use the difference between the actual dividend and the analyst consensus forecast as obtained from I/B/E/S as a proxy for the surprise in the dividend announcement. Using data from Germany, we find significant share price reactions after dividend announcements. We use panel methods to analyze the determinants of the share price reactions and find evidence in favour of the cash flow signaling hypothesis and dividend clientele effects. We further find that the price reaction to dividend surprises is related to the ownership structure of the firm. The results do not support the free cash flow hypothesis. An additional result of our analysis is that dividend changes are not an appropriate measure to capture the information content of dividend announcements.