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  • 2013 Fall: Volume 12, Issue 1
  • Returns of Dividend vs. Non-Dividend-Paying Stocks and Their Relations With Financial Distress and Market Risk Measures

    • Reza Rahgozar ;
    • Navid D. Rahgozar

    Title:

    Returns of Dividend vs. Non-Dividend-Paying Stocks and Their Relations With Financial Distress and Market Risk Measures

    Author(s):

    Reza Rahgozar
    Navid D. Rahgozar

    Publication Date:

    2014

    Journal Title:

    The Journal of Finance Issues

    Volume Number:

    13

    Issue Number:

    1

    Abstract:

    This study investigates whether risks and returns of dividend-paying stocks differ from non-dividend-paying stocks. It also examines the financial health and market risk exposure of dividend vs. non-dividend paying firms. The descriptive statistics show that average risks and return of non-dividend paying stocks are higher than dividend-paying stocks. However, tests of equality of means and variances fail to support the conventional view that dividend paying stocks’ returns and risks differ from non-dividend paying stocks over time. The Altman financial stress test shows that the average Z-score of non-dividend-paying stocks is higher and is more volatile than non-dividend paying firms. However, the results strongly reject the argument that dividend and non-dividend paying firms are equally exposed to financial risks. Furthermore, the tests of equality of mean and variance of market risk of dividend paying vs. non-dividend paying stocks are strongly rejected.

    First Page:

    35

    Last Page:

    42

    Total Pages:

    8