This study tests catering theory of dividend policies in twenty-one countries from 1991 to 2017. First, we show that there are important differences in corporate dividend policies across countries. Second, we find that the catering incentive is stronger when investor sentiment is low. Third,...

We examine the return information conveyed by a firm’s dividend surprise, defined as the difference between a firm’s actual dividend per share (DPS) and investors’ expected DPS. We find that negative-surprise stocks (i.e., stocks in the lowest dividend surprise quintile) provide 5.64% more...