Dividend Theory, Signaling and Corporate Performance after the Dividend Changes

A substantial theoretical literature, suggests that corporate dividend policy is designed to reveal earnings prospects to investors. A Literature contends that dividend changes disclose information about a firm's permanent income. Dividend signaling models make the more specific predictions that firms raise dividends either prior to earnings increases or to reveal that an increase is permanent. Research looking for evidence of signaling provides mixed evidence at best. We investigated firm's performance after dividend changes by selected sample includes 89 firms listed on Tehran Stock exchange during the 1377-1386. Our findings provide evidence that shows dividend decreases disclose information about a firm's future earnings but inconsistent with signaling, dividend increases don’t have information content about future earnings.