Logo Logo
Switch Language to German
Homburg, Carsten; Müller, Christian; Nasev, Julia (2018): How Important are Dividend Signals in Assessing Earnings Persistence? In: Contemporary Accounting Research, Vol. 35, No. 4: pp. 2082-2105
Full text not available from 'Open Access LMU'.


We build and test a Bayesian model that shows how investors revise their earnings persistence expectations after dividend announcements. When dividend changes confirm preceding earnings changes, our model predicts inverse u-shaped investor revisions conditional on the prior expectations for noisy dividend signals. As the dividend signal becomes more informative, our model predicts that investor revisions will become more skewed converging to a monotonically decreasing relation for perfectly informative dividend signals. When dividend changes contradict preceding earnings changes, our model predicts u-shaped investor revisions. In empirical tests, we find results generally consistent with our model predictions.