An example of the existence of an information content effect of dividends is when IBM's share price rises upon the announcement of unexpectedly high earning.

Question

Quizplus · Accepted Answer

The information content effect of dividends refers to the impact of dividend announcements on a company's stock price. When a company announces unexpectedly high earnings, it can lead to an increase in the company's stock price as investors perceive the company as being more profitable and financially sound.

An Example of the Existence of an Information Content Effect