KyungJae Rhee
This study examines whether there exist changes in dividend smoothing in Korea around the 2008 financial crisis, and analyzes the effect of dividend smoothing on firm valuation pre- and post-financial crisis. The results are as follows: First, the degree of dividend smoothing after the 2008 financial crisis has decreased by 20.5%. The market has positively reacted to smoothed dividend announcements, but the post-crisis market response diminished compared to the pre-crisis level. Second, the market shows a positive and increased (decreased) reaction for more (less) smoothing dividend announcements compared to the pre-crisis level. The results indicate that the market prefers greater dividend smoothing and that the effect of dividend signaling is reduced but still exists in Korea. Finally, a negative and significant coefficient sign of SOA for more smoothing dividend announcers indicates that dividend smoothing behavior plays an important role in the firm valuation for more smoothing dividends.