Special dividends and the evolution of dividend signaling

This paper documents that (1) special dividends were once commonly paid by NYSE firms, but are now rarely paid; (2) firms typically paid specials almo st as predictably as they paid regular dividends; (3) despite the dramatic overall decline in specials, the incidence of very large specials increased in recent years; and (4) special dividends were not displaced by stock rep urchases. Most plausibly, small specials disappeared because their predicta bility made them close substitutes for regular dividend signals, while larg e specials survived because their sheer size automatically differentiates t hem from regulars. (C) 2000 Elsevier Science S.A. All rights reserved. JEL classification: G35; D82.