The informational role of strategic insider trading around corporate dividend announcements is studied based on the efficient equilibrium in a signaling model with endogenous insider trading. Insider trading immediately prior to the announcement of dividend initiations has significant...

An efficient signaling equilibrium with dividends and investment, or equivalently, dividends and either sales or repurchases of stock, is constructed and its properties are identified. Because corporate insiders can exploit two signals, the efficient mix minimizes dissipative costs. In...