The effect of information shocks on dividend payout and dividend value relevance

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dc.contributor.author Harakeh, Mostafa
dc.contributor.author Lee, Edward
dc.contributor.author Walker, Martin
dc.date.accessioned 2020-01-13T13:48:28Z
dc.date.available 2020-01-13T13:48:28Z
dc.date.copyright 2019 en_US
dc.identifier.issn 1057-5219 en_US
dc.identifier.uri http://hdl.handle.net/10725/11715
dc.description.abstract We exploit the mandatory adoption of International Financial Reporting Standards (IFRS) as a source of exogenous shock to the corporate financial information environment to study the potential effect that this information shock might have on the dividend payout policy and dividend value relevance in the UK and France. We employ a difference-in-differences research design, in which our choice of the control and treatment groups is mainly based on the divergence between domestic accounting standards and IFRS, while holding institutional factors constant. The UK domestic accounting standards slightly diverge from IFRS (low-divergence firms), whereas French domestic accounting standards substantially diverge from IFRS (high-divergence firms). Nevertheless, both countries have similar institutional factors that might confound the effect of IFRS adoption. Our theoretical argument is that IFRS adoption is expected to mitigate information asymmetry, a major reason for the free cash flow problem (Jensen, 1986) and cash over-retention (Myers & Majluf, 1984). Our findings suggest that IFRS adoption is a major contributor in increasing dividend payouts among high-divergence firms via reduction of asymmetric information. Moreover, improving the information environment helps investors become more confident about using accounting numbers to assess firm financial performance, which causes a significant reduction in dividend value relevance among high-divergence firms. en_US
dc.language.iso en en_US
dc.title The effect of information shocks on dividend payout and dividend value relevance en_US
dc.type Article en_US
dc.description.version Published en_US
dc.author.school SOB en_US
dc.author.idnumber 200701866 en_US
dc.author.department Finance And Accounting en_US
dc.description.embargo N/A en_US
dc.relation.journal International Review of Financial Analysis en_US
dc.journal.volume 61 en_US
dc.article.pages 82-96 en_US
dc.keywords Information shocks en_US
dc.keywords Information asymmetry en_US
dc.keywords IFRS en_US
dc.keywords Dividend payout en_US
dc.keywords Dividend value relevance en_US
dc.identifier.doi https://doi.org/10.1016/j.irfa.2018.10.009 en_US
dc.identifier.ctation Harakeh, M., Lee, E., & Walker, M. (2019). The effect of information shocks on dividend payout and dividend value relevance. International Review of Financial Analysis, 61, 82-96. en_US
dc.author.email mostafa.harakeh@lau.edu.lb en_US
dc.identifier.tou http://libraries.lau.edu.lb/research/laur/terms-of-use/articles.php en_US
dc.identifier.url https://www.sciencedirect.com/science/article/pii/S1057521918305544 en_US
dc.orcid.id https://orcid.org/0000-0003-3294-4391 en_US
dc.author.affiliation Lebanese American University en_US

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