Abstract

This study examines share price reaction and changes in beta and trading activity surrounding announcements of dividend omissions and resumptions made by Canadian corporations. Significant negative abnormal returns are identified for a three-day announcement period. No significant shift in beta is found. The abnormal returns are not related to corporate size or to the size of the dividend changes. Dividend omission announcements generate changes in trading value. When the dividend omission sample is split into two subgroups according to the subsequent dividend policies of the corporations, the market model CAR are comparable and insignificantly different from each other. Dividend resumption announcements are not followed by significant changes in share price, beta or trading activity. All reported findings are robust to various estimation biases.