Market Reaction to Dividend‐decrease Announcements: Public Utilities vs. Unregulated Industrial Firms

In this study I compare the common share price reaction to dividend‐decrease announcements by public utilities with the share price reaction to dividend‐decrease announcements by unregulated firms. Regressing cumulative prediction errors from an event study methodology on firm characteristics, the empirical evidence shows that dividend decreases by public utilities prompt stronger negative market reactions than similar announcements by unregulated firms, even when yield, yield change, firm size, and Tobin's Q differences are considered.