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...

Standard equity valuation approaches (i.e., DDM, RIM, and DCF model) are derived under the assumption of ideal conditions, such as infinite payoffs and clean surplus accounting. Because these conditions are hardly ever met, we extend the standard approaches, based on the fundamental principle of...

Previous empirical studies derive the standard equity valuation models (i.e., DDM, RIM, and DCF model) while assuming that ideal conditions, such as infinite payoffs and clean surplus accounting, exist. Because these conditions are rarely met, we extend the standard models by following the...

Prior studies associate dividends with permanent earnings signals and stock repurchases with transitory earnings signals. In contrast, we provide empirical evidence that in recent decades, dividends and stock repurchases have converged to each other in terms of their signaling for future...

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 Müller assumes that firm’s dividend decision conveys useful...