Investigating Bhattacharya Hypothesis about the Effect of Dividend Signal on Information Asymmetry Risk: An Earnings Transparency Approach
Publish Year: 1396
نوع سند: مقاله ژورنالی
زبان: English
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شناسه ملی سند علمی:
JR_IJFMA-1-4_006
تاریخ نمایه سازی: 13 آذر 1400
Abstract:
Information asymmetry in stock market can increase the risk of investment which in turn increases the capital cost of firms. Bhattacharya (۱۹۷۹) proposed a hypothesis that states dividend can act as a powerful signal in order to solve information asymmetry problem. We measured information asymmetry by lack of earnings transparency. Therefore we examine the effect of earnings transparency on capital cost in two portfolios; the first with high dividend and the second with low dividend to test the above hypothesis. The results indicate that earnings transparency can only increase market component of expected return. In other words in the portfolio with low dividend signal there is a negative relation between earnings transparency and expected return (meaning that information asymmetry has not been solved). On the other hands in the portfolio with high dividend, the earnings transparency has no negative effect on capital cost; meaning that dividend signal solved information asymmetry problem
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Authors
Saeed Fathi
Associate Professor, Department of Management, Faculty of Administrative Sciences and Economics, University of Isfahan, Isfahan, Iran Corresponding Author
Fatemeh Dehghani Poodeh
MSc Department of Management, Faculty of Administrative Sciences and Economics, University of Isfahan, Isfahan, Iran
Ahmad Googerdchian
Assistant Professor in Economics Department, Faculty of Administrative Sciences and Economics, University of Isfahan, Isfahan, Iran
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