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Institutional trading before dividend reduction announcements

Author

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  • Henry, Darren
  • Nguyen, Lily
  • Pham, Viet Hung
Abstract
Using a large proprietary database of transaction-level institutional trades for the 1997–2011 period, we find that institutional investors are net sellers in dividend reduction firms during the two quarters prior to the announcements. They also trade more intensively in firms that do not prepare the market for dividend cuts or that have greater information asymmetry. Trading by both pension plan sponsors and money managers affects the market's reaction to the dividend reduction announcements. Finally, all institutional investors earn significant profits by trading in the two quarters prior to the announcements, and money managers outperform pension plan sponsors.

Suggested Citation

  • Henry, Darren & Nguyen, Lily & Pham, Viet Hung, 2017. "Institutional trading before dividend reduction announcements," Journal of Financial Markets, Elsevier, vol. 36(C), pages 40-55.
    • Handle: RePEc:eee:finmar:v:36:y:2017:i:c:p:40-55
    DOI: 10.1016/j.finmar.2017.07.003
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    5. Guo, Pancheng & Li, Shi & Wang, Yan, 2023. "Asset pricing with dividend surprises," Finance Research Letters, Elsevier, vol. 58(PB).
    6. Ebenezer Asem & Vishaal Baulkaran & Pawan Jain & Mark Sunderman, 2022. "Are institutional investors informed? The case of dividend changes for REITS and Industrial Firms," Review of Quantitative Finance and Accounting, Springer, vol. 58(4), pages 1685-1707, May.
    7. Muhammad Nadeem & Ernest Gyapong & Ammad Ahmed, 2020. "Board gender diversity and environmental, social, and economic value creation: Does family ownership matter?," Business Strategy and the Environment, Wiley Blackwell, vol. 29(3), pages 1268-1284, March.

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    More about this item

    Keywords

    Dividend reduction announcements; Institutional trading;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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