Discussion: Empirical Evidence on Dividends as a Signal of Firm Value

Abstract

The major objective of Ken Eades' paper is to provide new insights into the role of dividend changes as information signaling devices. Eades argues that the traditional notion of the “information content of dividends” is based more on conjecture than on a well-specified economic model. Eades suggests that without a well-specified model, we are limited significantly in producing testable hypotheses about dividend signaling. Therefore, Eades extends the dividend signaling model of Bhattacharya [2] and provides statistical tests of the resulting hypotheses.