Stock Dividends

What is it about?

We assess the market valuation of an unusual form of stock dividends, referred to as bonus distributions, and we find positive excess returns on the announcement dates, particularly for the financially weak firms, such as the non-cash-dividend-paying firms. We relate our results to the ‘paid-in capital hypothesis under which firms opt for bonus distributions to mitigate the impact of inflation on their eroding paid-in capital, to reduce their leverage defined as debt-to-paid-in-capital ratio.

Featured Image

Why is it important?

A different type of stock dividends, particularly used by Chinese, Indian and Australian companies