Emmanuel D. Tsiritakis

Shareholders wealth effects and intra-industry signals from European financial institution consolidation announcements

This study examines shareholder wealth effects and intra-industry signals of consolidation announcements in the European financial sector over the period 2000 to 2006. Results show that announcements generate strong positive valuation effects for targets that become higher in cross-border and small value deals, and are negatively related to their relative size and prior performance. Evidence of acquirer returns is mixed depending on value size, geographic location and legal status of the deal, while returns of combined entities are mostly positive. Our findings provide preliminary evidence that European consolidation announcements transmit intra-industry signals that may encourage or discourage future takeover deals through the revaluation of other similar European financial institutions that are considered prospective targets ‘rival financial institutions’.

Signaling With Mandatory Dividends: The Case of the Greek Stock Market

We explore the effect of dividend announcements on stock market returns in the context of an event study. Our sample consists of firms paying the minimum required dividend and firms paying above the required minimum. In Greece, tax wise, dividends are treated equally with capital gains and corporate management is controlled by major shareholders to a large extend. Controlling for managerial moral hazard and the degree of back- and frontloading of the managerial compensation scheme, our theoretical model predicts that with known assets in place and asymmetric information on reinvestment prospects, unexpected dividend increases result in negative abnormal returns. Also, the higher the expectations of investors about reinvestment prospects, the lesser the impact on the stock price when firms announce the minimum required dividend. These theoretical predictions are corroborated from our empirical findings. Announcements when minimum dividend is paid have no signaling effect providing prima facie evidence that dividends contain new information not embedded in contemporaneous earnings announcements.

Time-Disaggregated Dividend–Price Ratio and Dividend Growth Predictability in Large Equity Markets

Even in large equity markets, the dividend-price ratio is significantly related with the growth of future dividends. In order to uncover this relationship, we use monthly dividends and a mixed data sampling technique which allows us to cope with within-year seasonality. We reduce the effect of price volatility on the dividend-price ratio by applying a simple smoothing technique, and we identify the component of the smoothed dividend-price ratio that offers predictive power. An empirical analysis using market level data from U.S., U.K., Canada and Japan strongly supports the dividend growth predictability hypothesis, suggesting that time-aggregation of dividends eliminates significant information.

Revisiting Dividend Growth Predictability via Dividend Yield

One of the main theoretical implications of the present value approach on firm valuation is the hypothesis that dividend yield has a predictive power on future dividend growth. The relevant literature, however, was not able to provide evidence that clearly supports this hypothesis. In this paper we cope with the two main reasons that raise the econometric complexity on testing the dividend growth predictability hypothesis, namely, the seasonality effects that appear when higher frequency data are used, and the effect of price volatility on the computation of dividend yield. Specifically, an application of a the Mixed Data Sampling (MiDaS) technique allows us to use monthly dividend data in order to test the hypothesis that dividend yield explains the future annual dividend growth. In order to cancel out the effects of price variation on dividend yield we use a smoothing technique, and we identify the component of the smoothed dividend yield that offers predictive power. Empirical evidence from US, UK, Canada, Germany, France and Japan, strongly supports the dividend growth predictability hypothesis.