Stock Return Volatility and Dividend Announcements.

This paper is based on models presented in Kim and Verrecchia (1991) relating to share price volatility and the quality of announcements. It investigates the differences in informational quality between dividend cuts and dividend rises, and between interim and final dividend announcements. The results indicate that when dividends are cut, the interim announcement is perceived as being more significant than the final, whereas the reverse is true when dividends are increased. Implied standard deviations suggest that volatility is expected to peak on the day of final announcements. A peak is also expected after interim announcements of a cut in dividend, but not after announcements of an increase. Copyright 1999 by Kluwer Academic Publishers