Menu Expand



Sturz, D. (2015). Stock Dividends in Germany. An Empirical Analysis. Verlag Wissenschaft & Praxis.
Sturz, Dirk. Stock Dividends in Germany: An Empirical Analysis. Verlag Wissenschaft & Praxis, 2015. Book.
Sturz, D (2015): Stock Dividends in Germany: An Empirical Analysis, Verlag Wissenschaft & Praxis, [online]


Stock Dividends in Germany

An Empirical Analysis

Sturz, Dirk

Studienreihe der Stiftung Kreditwirtschaft an der Universität Hohenheim, Vol. 50


Additional Information

Book Details



Stock distributions can affect the number of outstanding shares and the equity structure of a firm. From a neoclassical perspective, neither should have any effect on market value. However, a respectable number of empirical studies disclose overwhelming evidence that stock markets have a significantly positive reaction to the announcement of stock distributions.

Despite the broad consensus about the positive market reaction, the possible causes are still debated. Focusing on stock dividends, which are a special type of stock distribution, this study revisits this puzzle and provides deeper insight into the economic ramifications of changes in the equity structure.

Table of Contents

Section Title Page Action Price
Preface 7
Table of Contents 9
Tables 13
Figures 15
I Introduction 17
II Regulatory Framework 21
II.1 Basic Conditions 21
II.1.a Stock Dividends, Stock Splits and Accounting 21
II.1.b Bonus Shares 25
II.1.c Effects on the Par Value 25
II.2 Further Legal Implications 28
II.2.a Restrictions for Future Equity Issuances 28
II.2.b Distribution of Funds 32
II.3 Conclusions 36
III Theory and Empirical Evidence 39
III.1 Theoretical Considerations on Stock Distributions 39
III.1.a Classification of Existing Approaches 39
III.1.b Signaling Theory 40
III.1.b.1 Fundamentals of Signaling 40
III.1.b.2 Stock Distributions as Signals 41
III.1.b.2.1 Retained Earnings Hypothesis 41
III.1.b.2.2 Reputation of the Management 45
III.1.b.2.3 Neglected Firm 46
III.1.b.2.4 Trading Range as a Signal 47
III.1.c Liquidity and Further Explanations 47
III.1.c.1 Trading Range Hypothesis 47
III.1.c.2 Further Explanations 48
III.1.d Jensen’s Free Cash Flow Hypothesis 49
III.1.e Conclusions 50
III.2 Empirical Evidence 50
III.2.a Evidence from the US 50
III.2.a.1 Signaling Effects 50
III.2.a.2 Liquidity Effects 55
III.2.b Evidence from Germany 56
III.2.b.1 General Findings 56
III.2.b.2 Signaling Effects 60
III.2.b.3 Liquidity Effects 63
IV Data and Methodology 65
IV.1 Descriptive Data 65
IV.1.a Data Collection 65
IV.1.b Size of the Firms 66
IV.1.c Distributions of Events through Time 66
IV.1.d Split Ratio 67
IV.2 Event Study Design 69
IV.2.a Market Efficiency 69
IV.2.b Computation of Abnormal Returns 71
IV.2.b.1 Discrete and Continuous Returns 71
IV.2.b.2 Modeling Normal Returns 73
IV.2.c Statistical Estimation of Normal and Abnormal Returns 77
IV.2.d Test of Significance 78
IV.3 Proxy for Jensen's Free Cash Flow 80
V Data Analysis 83
V.1 Announcement Effect of Stock Dividends 83
V.1.a Estimation of Abnormal Returns 83
V.1.b Analysis of Abnormal Returns 85
V.1.b.1 Cumulative Abnormal Returns for the Total Sample 85
V.1.b.2 Diluted Events 86
V.1.b.3 Special Distributions 90
V.1.b.4 Euro Converters 94
V.1.b.5 Split Ratio Effects 96
V.1.b.6 Bonus Shares 101
V.1.b.7 Cash Dividends 104
V.1.b.8 Market Value 108
V.2 Test of the Free Cash Flow Hypothesis 111
V.2.a Cash Flow and Tobin's q 111
V.2.b Free Cash Flow Proxy 117
VI Conclusions 125
Appendices 127
References 145