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    Dividend Policy, Stock Liquidity and Stock Price Informativeness

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    PhD Thesis (1.428Mb)
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    Publication date
    2017
    Author
    Ebrahim, Rabab H.A.H.
    Supervisor
    Mazouz, Khelifa
    Sharma, Abhijit
    Keyword
    Dividend policy
    Stock liquidity
    Systematic liquidity risk
    Cost of capital
    Stock price informativeness
    Rights
    Creative Commons License
    The University of Bradford theses are licenced under a Creative Commons Licence.
    Institution
    University of Bradford
    Department
    School of Management, Faculty of Management & Law
    Awarded
    2017
    
    Metadata
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    Abstract
    Dividend policy, its determinants, and its impact on firm value are of significant academic interest, and many theories and explanations have been posited on the subject over the years, but there has not been a universal agreement. This thesis examines the links between dividend policy, various aspects of stock liquidity and price informativeness. We study a sample of UK firms over the period from 1996-2013. We show that, on average, stocks of dividend payers have significantly lower bid–ask spread and a lower illiquidity ratio than their counterparts of non-dividend payers. We also find that stocks of high-dividend payers are more liquid than those of firms that pay low or no dividends. These findings are consistent with the predictions of asymmetric information that posit that paying dividends reveals inside information to the market and hence decreases the level of asymmetric information, leading to higher stock liquidity. In the subsequent analysis, we suggest and examine a new channel through which dividend policy can impact firm value. Specifically, we show that dividend payers are less exposed to shocks in the aggregate market liquidity than non-dividend payers. Similarly, we find that the systematic liquidity risk is negatively associated with amount of dividends. Finally, in the context of signalling and agency costs models, we show that dividends are negatively related to stock price informativeness and that this relationship is stronger for firms with lower stock liquidity. The findings imply that dividend policy can both affect and be affected by stock markets.
    URI
    http://hdl.handle.net/10454/16047
    Type
    Thesis
    Qualification name
    PhD
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    Theses

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