Vol. 7 No. 4 (2019): Business & Management Studies: An International Journal
Articles

INFORMATION CONTENT OF DIVIDEND (SIGNALLING THEORY): EVIDENCE FROM ISTANBUL STOCK EXCHANGE

Devran DENİZ
Bandırma

Published 2019-09-23

Keywords

  • Signalling Theory, Information Content of Dividend, Istanbul Stock Exchange.
  • Sinyal Teorisi, Temettünün Bilgi İçeriği, Borsa İstanbul.

How to Cite

DENİZ, D. (2019). INFORMATION CONTENT OF DIVIDEND (SIGNALLING THEORY): EVIDENCE FROM ISTANBUL STOCK EXCHANGE. Business & Management Studies: An International Journal, 7(4), 1530-1554. https://doi.org/10.15295/bmij.v7i4.1247

Abstract

In this study, the validity of signalling theory (information content of dividend) in manufacturing industry and financial companies registered in Istanbul Stock Exchange was  researched for the 2006-2018 data period. For this purpose, the relationship between the dividend changes of companies and the profit changes in the years following the dividend change was analysed. As a result of the analysis, a positive relationship was found between the dividend change and the profit change of the year after the dividend change. This relationship is valid for both large and small scale companies in the manufacturing industry sector and only for big scale companies in the financial sector. As a result, in Istanbul Stock Exchange's manufacturing industry and large-scale companies in the financial sector it has been found that the dividends contain information about companies’ the financial situation in the next years after dividend changes. However, no relationship was found between the dividend change and the profit change in the second year following the dividend change year. This shows that the profit change in the following year of the dividend change is permanent. This finding coincides with the phenomenon that managers make dividend changes only when they think that there are permanent changes in the financial position of the company.

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