Dividend initiation as a signal of subsequent earnings performance – Warsaw trading floor evidence
Dividend initiation as a signal of subsequent earnings performance – Warsaw trading floor evidence

Summary/Abstract: The aim of this paper is to present the results of own empirical studies concern-ing the initiation of cash dividends paid by companies listed on the Warsaw Stock Ex-change. The purpose of this study was achieved by empirical verification of the main re-search hypothesis stipulating that the commencement of dividend payment should be treated as a signal of an improvement of subsequent earnings of the company. The empirical verifi-cation of research hypotheses was conducted on a group of 33 companies listed on the War-saw trading floor. To be included into the research sample the company had to initiate divi-dend or start paying it again after at least five years of break. The author uses the methodol-ogy of market event analysis, profitability analysis and deviation analysis. Studies have shown that: a) the market reacts positively to the announcement of dividend initiations in the third and second day before the event, b) the companies are profitable for a few years before and after the first dividend payment, c) the average dividend level increases in the subse-quent years in relation to event year.

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