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The Effect of Dividend Increase on Future Earnings: Evidence from Nordic Countries between 2000 and 2015

Jaber, Hani LU and Krisciunas, Rokas LU (2016) NEKN02 20161
Department of Economics
Abstract
This master thesis contributes to the literature concerning the theoretical and empirical understanding of dividend’s change on company’s future earnings. The paper analyses if dividends have explanatory power over future earnings. Also, the analysis expects to provide more evidence of the relationship in Nordic region. This thesis is based on a quantitative study where we use a sample of 586 companies listed on OMX Nordic all-share index over the period between 2000 and 2015. The sample resulted in total of 7021 instances of dividend changes. In addition to using change in earnings as dependent variable, change in dividends as independent variable, this study uses eight control variables that affect the relationship between dividends and... (More)
This master thesis contributes to the literature concerning the theoretical and empirical understanding of dividend’s change on company’s future earnings. The paper analyses if dividends have explanatory power over future earnings. Also, the analysis expects to provide more evidence of the relationship in Nordic region. This thesis is based on a quantitative study where we use a sample of 586 companies listed on OMX Nordic all-share index over the period between 2000 and 2015. The sample resulted in total of 7021 instances of dividend changes. In addition to using change in earnings as dependent variable, change in dividends as independent variable, this study uses eight control variables that affect the relationship between dividends and future earnings. This study finds that changes in dividends can explain next year’s downward dividend changes and two year’s after upward dividend changes. However, the coefficients of dividend changes are inconsistent with different specifications of regressions. Therefore, we conclude that dividends are a poor instrument to explain future earnings changes and should not be relied on when predicting company’s future earnings. (Less)
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author
Jaber, Hani LU and Krisciunas, Rokas LU
supervisor
organization
course
NEKN02 20161
year
type
H1 - Master's Degree (One Year)
subject
language
English
id
8877667
date added to LUP
2016-06-13 14:08:22
date last changed
2016-06-13 14:08:22
@misc{8877667,
  abstract     = {This master thesis contributes to the literature concerning the theoretical and empirical understanding of dividend’s change on company’s future earnings. The paper analyses if dividends have explanatory power over future earnings. Also, the analysis expects to provide more evidence of the relationship in Nordic region. This thesis is based on a quantitative study where we use a sample of 586 companies listed on OMX Nordic all-share index over the period between 2000 and 2015. The sample resulted in total of 7021 instances of dividend changes. In addition to using change in earnings as dependent variable, change in dividends as independent variable, this study uses eight control variables that affect the relationship between dividends and future earnings. This study finds that changes in dividends can explain next year’s downward dividend changes and two year’s after upward dividend changes. However, the coefficients of dividend changes are inconsistent with different specifications of regressions. Therefore, we conclude that dividends are a poor instrument to explain future earnings changes and should not be relied on when predicting company’s future earnings.},
  author       = {Jaber, Hani and Krisciunas, Rokas},
  language     = {eng},
  note         = {Student Paper},
  title        = {The Effect of Dividend Increase on Future Earnings: Evidence from Nordic Countries between 2000 and 2015},
  year         = {2016},
}