Determinants of Dividend Initiations by Technology Firms

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Authors

choudhary, gajendra

Issue Date

2021

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Thesis

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CAR , dividend initiation , tech firms

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Abstract

This thesis presents evidence that tech firms are more likely to initiate dividends to signal undervaluation than non-tech firms. I present evidence that tech firms with lower market to book ratios experience both more positive abnormal returns surrounding dividend initiations and greater increases in earnings following dividend initiations when compared to otherwise similar non- tech firms. I also present some evidence consistent with the tech firms being more likely to use dividends to stem agency costs. Tech firms with few investment opportunities and high cash flows, have higher stock returns surrounding dividend initiations than otherwise similar non tech firms. I find no evidence that dividend initiations of tech firms signal a reduction in risk.

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