Dividend Initiations by High-Tech Firms

We study the stock price and trading volume reactions to dividend initiations by high-tech firms relative to those by non-high tech firms. We find significant positive cumulative abnormal returns and abnormal trading volume for both high-tech and non-high tech firms surrounding dividend initiations. However, when we control for variables such as size and dividend yield, stock returns and trading volume around dividend initiations are higher for high-tech firms than for non-high tech firms. We also find evidence that stock returns and trading volume for high-tech firms are higher with increases in liquid assets, although the volume reaction to increases in liquid assets is stronger than the return reaction, perhaps indicating clientele shifts. Overall, our findings convey stronger investor reaction to dividend initiations by high-tech firms, especially those with sufficient liquid assets.