We are delighted to announce that Prof. Michaely’s research paper “Signaling Safety” (co-authored with Stefano Rossi from Bocconi and Michael Weber from the University of Chicago), was accepted for publication at the Journal of Financial Economics.
The paper was presented in several prestigious conferences before being accepted to publication including at the NBER Corporate Finance Meeting, The American Finance Association Annual Meeting , The Western Finance Association Annual Meeting, and The Corporate Finance Conference at Washington University.
The abstract of the paper is enclosed below and the full version can be access through ssrn:
Contrary to signaling models’ central predictions, changes in the level of cash flows do not empirically follow changes in dividends. We use the Campbell (1991) decomposition to construct cash-flow and discount-rate news from returns and find the following: (1) Both dividend changes and repurchase announcements signal changes in cash-ow volatility (in opposite direction); (2) larger cash-ow volatility changes come with larger announcement returns; and (3) neither discount-rate news, nor the level of cash-ow news, nor total stock return volatility change following dividend changes. We conclude cash-flow news—and not discount-rate news—drive payout policy, and payout policy conveys information about future cash-flow volatility.