Abstract Using the preliminary earning disclosure mechanism introduced by both Shanghai Stock Exchange and Shenzhen Stock Exchange in 2005 to separate the earning information and dividend distribution information of Chinese listed firms, the authors re-examined the market responses to stock dividend announcements in A-share market and adopted signaling hypothesis and liquidity hypothesis to explore its inherent causes. The findings show that there are positive market responses to stock dividend announcements even after earning information has been expected by the market. What is different from the previous researches is that the author found that listed firms granting stock dividends can keep earning increasing in the following 2 to 4 quarters. Therefore signaling hypothesis is a reasonable explanation of the market responses to stock dividends announcements. However, though stock dividend distributions can make small trading more active, most liquidity variables do not improve significantly, which means liquidity hypothesis is not suitable to Chinese A shares
SHU Yuan-Qi,LIU Shan-Cun. Revaluation of Stock Dividends and Value: Signaling, Liquidity Improvement or Price Illusion?. Economic Survey, 2011, 28(3): 0146.
2011, Vol. 28 
