Abstract
PurposeThe purpose of this paper is to examine the dividend initiation announcements made by firms in the information technology sector as defined in a modern system of industrial classification.Design/methodology/approachOn the basis of a modern classification of the information technology industry, the authors examine a wide range of corporate performance and management measures to discriminate between the two theories of the information revealed by the announcement of dividend initiations, the signaling, and life cycle theories.FindingsThe empirical results are more consistent with the corporate life cycle theory of dividends than with the information signaling hypothesis. This finding helps clarify the nature of the information revealed by the announcement.Originality/valueThe paper has clear implications for investors who are interested in the growth prospects of technology firms, or for others interested in their prospective stability and degree of maturity.
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