Professional Documents
Culture Documents
Financial Signaling
Cash dividends speak louder than words Occur if the dividend is more or less than expected Price of the stock may react to unanticipated changes in dividends
2002 Prentice Hall Publishing
Share Repurchase
Increased in importance relative to dividends Substitute for cash dividends Employee stock options and share repurchase Means to compensate employees Employees with existing stock options prefer share repurchase
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Method of Repurchase
Fixed-price tender offer Formal offer to stockholders to purchase so many shares at a set price Dutch-auction tender offer Dominant form of tender offer Open-market purchase SEC rules Disclose intentions
2002 Prentice Hall Publishing
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Stock Dividends
No reduction of par value
Accounting treatment differences Small-percentage stock dividend Large-percentage stock dividend
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Stock Splits
Number of shares is increased through a proportional reduction in the par value May increase cash dividends Place the stock in a more-popular trading range Informational or signaling effect Asymmetric information
Perceived earnings Not the stock dividend nor split itself
Reverse stock split Reduce the number of shares Usually a negative signal
2002 Prentice Hall Publishing
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