Article1988

Efficient Signalling with Dividends, Investment, and Stock Repurchases

112 citations0/0 files storedThe Journal of Finance

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Corporate Finance and Governance Financial Markets and Investment Strategies Financial Analysis and Corporate Governance

Abstract

ABSTRACT The efficient mix of dissipative dividends, investments in real and financial assets, and repurchases of stock is computed for a continuum of firms with inside information about the return on risky real assets. In the efficient signalling equilibrium, the representative firm optimally distributes dividends, invests in risky real assets to maximize net present value, holds no financial securities, and sells new stock in the market. This firm finances its value‐maximizing investment first from internal funds and second from stock sold to new investors.

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References

1984Corporate financing and investment decisions when firms have information that investors do not have 1985Dividend Policy under Asymmetric Information 1979Imperfect Information, Dividend Policy, and "The Bird in the Hand" Fallacy 1986Price and Advertising Signals of Product Quality 1985Dividends, Dilution, and Taxes: A Signalling Equilibrium 1980Quarterly Dividend and Earnings Announcements and Stockholders' Returns: An Empirical Analysis 1979Informational Equilibrium 1987A Theory of Stock Price Responses to Alternative Corporate Cash Disbursement Methods: Stock Repurchases and Dividends

Cited by

2007Dividend policy: a review 1999The Information Content of Dividend and Capital Structure Policies 1998Shareholder Heterogeneity, Adverse Selection, and Payout Policy 2010Repeated Signaling and Firm Dynamics 2015Dividend policy in India: new survey evidence 1992The Rationality of Dividends 1995

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