The stylized facts that firms pay and investors react to dividends
disregard dividend neutrality. Taking on the perspective that
informational asymmetries are the central determinant for dividend
value relevance, Christian Muller assumes that firm s dividend
decision conveys useful information to investors. He shows that
investors use dividend changes to revise their a priori
expectations about the persistence of a current earnings change.
While his theoretical and empirical analyses generally imply that
dividend changes constitute informative, but imperfect information
signals, he further identifies situations in which they are
substantial to investors. Christian Muller s research
comprehensively examines the informational role of dividend policy
and provides new insights to the corresponding Bayesian investor
learning process.
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