Abstract

Based on Amihud and Li's (2006) and DeAngelo, DeAngelo, and Skinner's (2004) findings on the "disappearing dividends" phenomenon documented by Fama and French (2001), we examine the relation between institutional holdings and information content of dividends across different payer groups. We find that the increase of institutional holdings mainly contribute to firms' declining information content of dividend change announcements, and this effect is stronger and concentrated in bottom payers. Furthermore, the change of holdings owned by institutional investors with different incentive to monitor a firm's governance has distinct effects on the decline of information content across top and bottom payers. Our results indicate that for top payers, only the increase of ownership held by motivated monitors is negatively associated with the information content of dividends. On the contrary, the information content conveyed by dividends in bottom payers is sensitive to all kinds of institutional holdings, including that are generally regarded as unconcerned about firms' governance.