Li Jiang
Hong Kong Polytechnic University
Jeong-Bon Kim
Hong Kong Polytechnic University
Abstract: We examine differential price and volume reactions to contemporaneous dividend and earnings announcements, using a sample of stocks from Hong Kong. We focus on corroborative volume effect and find that volume reaction is stronger with conflicting dividend signals. This is in contrast to corroborative price effect where confirming dividend signals strengthen price reaction. Our evidence suggests that confirming dividend signals improve the quality of earnings disclosure, whereas conflicting dividend signals attract investorsÂ’ attention and trigger greater differential interpretations. Furthermore, price reaction to negative earnings surprises is more pronounced for confirming dividends signals. This provides supporting evidence that stock prices tend to reflect optimistic views where divergent opinions exist.
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