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Research Paper | Business Management | Tanzania | Volume 8 Issue 7, July 2019
Firm Performance Following Dividend Policy Changes: An Empirical Analysis
Abstract: An analysis of firm performance following dividend policy changes was conducted. It is found that operating performance improves following dividend decreases, there is a reduction in financial leverage and an improvement in liquidity. A sensitivity analysis shows that the improvement in operating performance is attributable to the decision to decrease dividends and is not caused by a mean reversion in earnings. Thus, the decision to decrease dividends reverses a declining trend of poor performance, and reduces financial leverage and liquidity problems. Finally, consistent with previous studies, the findings here are that the market reacts negatively to announcements of dividend decreases.
Keywords: Dividend policy, firm performance, dividend decreases, market reaction
Edition: Volume 8 Issue 7, July 2019,
Pages: 738 - 742