Dividend change context and signaling efficiency in Japan

This paper examines the relationship between dividend adjustments, and subsequent operating performance and long-term stock returns for a large sample of Japanese firms. Its most distinct contribution is to take into account the conditions under which the adjustments take place using a predictive model of dividend changes. A more significant association between dividend changes and subsequent earnings is obtained. Risk-adjusted returns at long horizons are shown to be consistent with the predicted change in earnings.