SHENG-SYAN CHENFu, Kuei ChinKuei ChinFu2023-05-172023-05-172011-09-0102190915https://scholars.lib.ntu.edu.tw/handle/123456789/631122This paper measures unexpected dividend changes in testing the free cash flow and information/signaling hypotheses using the BarYosef/Sarig method. The empirical findings reveal the following: (i) The association between announcement period abnormal returns and the cash level is significantly positive for low q firms; (ii) The positive association between announcement period, abnormal returns, and the cash level is stronger in low q than in high q firms for most regressions; (iii) Low q firms reduce their capital and research and development (R&D) expenditures during the four fiscal years following dividend increase announcements. Our results are consistent with the free cash flow hypothesis. © 2011 World Scientific Publishing Co. and Center for Pacific Basin Business, Economics and Finance Research.enFree cash flow hypothesis | Information/signaling hypothesis | Regular dividend | Unexpected dividend changesjournal article10.1142/S02190915110023292-s2.0-80052945344https://api.elsevier.com/content/abstract/scopus_id/80052945344