Title: Are investors' desires for dividend increases stronger than dividend initiation?

Authors: Liliana Inggrit Wijaya; I. Made Narsa; Andry Irwanto; Rahmat Setiawan

Addresses: Faculty of Economics and Business, Universitas Airlangga, Surabaya 60285, East Java, Indonesia ' Faculty of Economics and Business, Universitas Airlangga, Surabaya 60285, East Java, Indonesia ' Faculty of Economics and Business, Universitas Airlangga, Surabaya 60285, East Java, Indonesia ' Faculty of Economics and Business, Universitas Airlangga, Surabaya 60285, East Java, Indonesia

Abstract: This study aims to explore whether information asymmetry premium (IAP) as the foundation of the investors' desire in the dividend increases decision is stronger than the dividend initiation decision. This study finds that IAP can significantly complement the dividend increases decisions and substitute dividend premium for dividend initiation. The results of the study support Li and Lie (2006) and Chazi et al. (2018), who fleshed out Baker and Wurgler (2004b). The findings of this study show that the investor's desire towards dividend increases reflects investor sentiment on dividends, explained through the level of information asymmetry between dividend payers and non-payers. Further analysis shows that irrational investor behaviour in expecting dividend increases to be paid continuously is significant compared to dividend initiation. This research contributes to behavioural finance research in bonding dividend catering incentives and dividend signaling theory.

Keywords: dividend increases; dividend initiation; IAP; information asymmetry premium; dividend premium; investors' desire; behavioural finance; dividend catering incentives; dividend signaling theory.

DOI: 10.1504/IJTGM.2021.118900

International Journal of Trade and Global Markets, 2021 Vol.14 No.6, pp.559 - 579

Received: 20 Aug 2019
Accepted: 04 Mar 2020

Published online: 28 Oct 2021 *

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