Academy of Accounting and Financial Studies Journal (Print ISSN: 1096-3685; Online ISSN: 1528-2635)


Existence of Dividend Smoothing After the Financial Crisis and the Sensitivity of Firm Value to Dividend Smoothing: Evidence from Korea

Author(s): KyungJae Rhee

This study examines whether there exist changes in dividend smoothing in Korea around the 2008 financial crisis, and analyzes the effect of dividend smoothing on firm valuation pre- and post-financial crisis. The results are as follows: First, the degree of dividend smoothing after the 2008 financial crisis has decreased by 20.5%. The market has positively reacted to smoothed dividend announcements, but the post-crisis market response diminished compared to the pre-crisis level. Second, the market shows a positive and increased (decreased) reaction for more (less) smoothing dividend announcements compared to the pre-crisis level. The results indicate that the market prefers greater dividend smoothing and that the effect of dividend signaling is reduced but still exists in Korea. Finally, a negative and significant coefficient sign of SOA for more smoothing dividend announcers indicates that dividend smoothing behavior plays an important role in the firm valuation for more smoothing dividends.

Get the App