canadian special dividends

7/28/2019 Canadian Special Dividends

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Special Dividend

Announcements: A

Canadian PerspectiveEvent Study Analysis Report

Authors

Christina Bakhos 10079694

Eric Crowley 100791435

Eddy Dostal 100639011

Katarzyna Gnatek 100795176

John Harvey 100787004

ast studies indicate that the initiation of a special dividend

esults in a positive effect on the price of stock for the issuing firm

round the time of the announcement. The purpose of this paper

to extend such studies to a more recent period of time while

ocusing on the Canadian stock market as a topic of interest.

BUSI 4500A

Carleton University

Submitted to Sana Mohsni

4/8/2013


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Table of Contents

1.0 Abstract ................................................................................................................................................ 3

2.0 Introduction and Motivation ............................................................................................................... 3

3.0 Literature Review ................................................................................................................................. 4

3.1 Regular Dividends .................................................................................................................... 5

3.2 Special Dividends ..................................................................................................................... 7

4.0 Key Research Question ...................................................................................................................... 12

4.1 Hypothesis ............................................................................................................................. 13

5.0Data Collection and Methodology ..................................................................................................... 13

6.0Signaling Effect ................................................................................................................................... 17

7.0 Regression Results.............................................................................................................................. 18

7.1 Capital Structure: Debt to Equity .......................................................................................... 19

7.2 Return on Assets .................................................................................................................... 21

7.3 Current Ratio .......................................................................................................................... 23

7.4 Return on Capital ................................................................................................................... 26

7.5 Two Period Analysis ............................................................................................................... 29

7.6 Market Capitalization ............................................................................................................. 30

8.0 Limitations and Considerations for Future Research

8.1 Special Dividend Data............................................................................................................ 31

8.2 Long Term Effects................................................................................................................... 31

8.3 Variables ................................................................................................................................ 32

8.4 Signaling ................................................................................................................................ 32

9.0 Conclusion .......................................................................................................................................... 33

10.0 Appendix .......................................................................................................................................... 35

11.0 Bibliography ..................................................................................................................................... 44


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1.0 Abstract

Whilst previous studies have focused on the impact of special dividend announcements

on U.S. firms, this paper will attempt to make similar observations on Canadian firms traded on

the Toronto Stock Exchange. Past literature has determined that the announcement of a special

dividend has a positive abnormal return on equity prices on the one day period. The hypothesis;

Ha: there are abnormal returns associated with Canadian special dividend announcements, was

thus accepted over the null hypothesis. The results obtained are therefore consistent with

previous studies: significant positive abnormal returns for stocks trading on the TSX occur on the

announcement date. The cumulative average abnormal returns for the Canadian firms involved in

this study were 1.75% whereas a return of 3.43% was discovered in similar studies on U.S.

firms. The positive abnormal returns do not continue past the one day period thus holding the

strong form of market efficiency hypothesis to be true. This was done by creating a window of

847 trading days prior to the announcement as an estimation period.

In order to develop an analysis as to what factor/s determine whether a firm will exhibit

abnormal return on the date of announcement, it was determined that firms with an ROA of 10 %

a year prior to the announcement exhibited significantly positive abnormal returns on the day of.

Finally, although there seemed to be a relationship between abnormal returns and firm size, the

regression results provided very little statistical significance in support for this relationship.

2.0 Introduction and Motivation

Although the focus of this study will pertain to special dividend paying firms, it is

imperative to describe and explain the importance of a regular dividend payment as an opening.

A dividend is a cash payment made to shareholders usually issued on a monthly, quarterly or

yearly basis. Quite frequently, firms which initiate dividends try to maintain the payments


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throughout the companys life. As described in a study by Dhillion (1994), initiations of

dividends and dividend increases are associated with positive market returns and strong firm

performance. Dividend initiations are usually a signal that a firm is transitioning from the growth

phase to a steady phase. Bulan (2007) stated that major characteristics of dividend initiators are

low growth rates, high profitability and high cash balances

The goal of this study is to determine whether the announcement of a special dividend

payment contributes to any abnormal return following the event. When a firm does not want to

maintain a payment schedule, it can issue a special dividend. This is different from issuing a

regular dividend as it is a onetime cash payment made to shareholders (Walter, 1956). Dividend

paying firms are notably large capitalization firms with high cash balances. Previous research

done by DeAngelo et al. (2000) revealed that abnormal returns occur in the short term upon the

announcement of a special dividend paid to shareholders. This paper will continue to examine

the special dividend announcement with respect to Canadian stocks. There is currently no major

research that documents the existence or effects of special dividend announcements for Canadian

Firms. There is also little research regarding the share price reactions of firms with different

market capitalizations. An event study analysis will be conducted using common stocks

exchanged on the Toronto Stock exchange in order to investigate the effects of special dividend

announcements. This paper will determine whether a difference in returns exists between market

capitalization and whether variables such as ROA, ROC, and D/E have any relationship with the

Canadian special dividend announcing firms.


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3.0 Literature Review

The proceeding review consists of existing literatures which analyze the impact of regular

and special dividends, with a focus on the latter. The majority of the studies reviewed came to

the conclusion that there are positive abnormal returns associated with firms that announce a

special dividend payment to shareholders. The literature also examines possible explanations for

why firms decide to pay special dividends instead of regular dividends or conduct share

repurchases. Other studies offer some possible predictive measures that investors can use to

assess the likelihood that a special dividend will occur in a firms near future, and thus profit

from the potential abnormal returns.

3.1 Regular Dividends

A firms decision to reduce its free cash flow capacity through the payment of dividends

has been notably used as a signal for a companys future performance. Although dividend

payment announcements are typically known to have positive impacts on stock price; a firm

should invest in a positive NPV project and withhold dividend payments if the firm is

experiencing a limit in free cash flow due to the dividend obligation. Otherwise, a negative

impact on price will be realized (Fairchild, 2010). Investors react more dramatically to negative

dividend changes than they do to dividend increase. This phenomenon needs to be taken into

account when deciding to decrease or cease a dividend payment (Denis & Sarin, 1994).

When managers initiate dividends, they must believe that they have sufficient long term

cash flows in order to continue to meet dividend payments. If this statement is true, dividend

changes should be related to the changes in the firms earnings. Pettit (1972) studied various

dividend changes to see if these changes were related to the previous earnings announcements; as

well as the reaction of the stock price upon the announcements. His findings suggest that a

substantial portion of the change in stock price is attributed to the announcement of the dividend.


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A stock with positive earnings that made a large dividend cut experiences price declines leading

up to the dividend announcement; then continues to decline in the months following. This differs

to a large dividend cut on a company that has had negative earnings. The performance leading up

to the cut was similar; however, after the dividend cut these firms saw their stock increase in

value in the months following (Pettit, 1972).

Although earnings are related to cash flow, they can be manipulated by various

accounting practices. Cash flow is a more predominate indicator of dividend sustainability than

earnings. As will be examined later within this study, some researchers associate dividend

announcements with a signaling hypothesis. Managers use dividends as a way to convey

information to shareholders about the future cash flows of the firm. Some shareholders may

prefer the firm to payout the excess cash flow as a dividend payment, while others would prefer

the firm to use the excess cash flow for profitable projects. Tobins Q is used as a proxy to

decipher between firms with positive investment opportunities (high Q) and firms with no

positive investment opportunities (low Q). It is assumed that investors would react more

positively to a dividend increase, special dividend or dividend initiation from a low Q firm than

they would from a high Q firm. This is because investors should prefer the high Q firm to

reinvest its cash flows into value maximizing projects rather than cash payments to shareholders.

Cash payments should be preferred by shareholders of low Q firms because these firms do not

have value maximizing projects available. Investors would be able to use the excess cash flow of

low Q firms more efficiently than the firm itself. However, no significant difference was found

for the abnormal returns associated with dividend announcements from low Q and high Q firms

(Howe, 1992). A later study conducted by David et al. (1994), found that low Q firms in fact had

different results from the high Q firms. The results showed that low Q firms actually did


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experience higher abnormal returns after announcing dividend increases than high the Q firms

did. However, they did not find any significant difference surrounding dividend decreases. It is

also found that analysts revised their EPS estimates for a firm by an average of 2.9% in the

direction of the dividend change which provides support for the information content of dividend

changes.

When considering the general characteristics of firms that decide to pay dividends, Bulan

et al. (2007) found that dividend initiators are generally large firms with relatively high

profitability, high cash balances and low growth rates. The systematic risk was observed to have

very little change before and after dividend initiation. It was found that the higher the dividend

premium, the higher the abnormal return on the announcement date. Stock prices of initiators are

also subjected to a more positive announcement effect. Since there are neither earnings nor

growth increases and systematic risk did not decline, a possible reason for the positive reaction to

dividend initiation may have been improved investor sentiment (a premium investors pay for

dividend paying stocks).

3.2 Special Dividends

The topic of signaling, which asserts that positive information about the firms future

earnings are potentially embedded within the dividend policy, has been a heavily studied topic.

However, not as much research has been dedicated to the signaling hypothesis for Canadian

special dividend paying firms. The main difference between an increase in a regular dividend

payment and a special dividend payment is that the regular dividend payment signals long term

earning growth, whereas special dividends are a one-time payment and thus exhibit short term

earnings growth. Companies initiating a regular dividend will therefore exhibit long term

earnings growth whereas those releasing a special dividend will only experience temporary

growth (Lie, 2000).


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The study conducted by DeAngelo (2000) further explores reasons why special dividends

were once a very common payment to investors but are now less common. The researchers found

that dividends can be a useful method of corporate signaling only when they send a clear

message, and that special dividends have become so common for many firms that they

essentially converged to common shares, and thus lost their unique signaling power. The study

also states that the market reacts favorably to the declaration of special dividends in general, but

that the relative increase or decrease in specials versus previous special dividends makes little

difference. The signaling quality of special dividends is quite small. Another conclusion is that

special dividends seem to decline as institutional investors become more prevalent than

individuals. Sophisticated investors can easily see that common and special dividends are merely

substitutes and prefer consistent payments. Finally, the study fails to find a relationship between

special dividends and stock repurchases; suggesting that special dividends are not being replaced

by repurchase plans. The findings in this study only further complicate the theories that

dividends have important signaling qualities; if strong signals were derived from the payment of

dividends then we would not have observed the phasing-out of special dividends. Firms that

announce a special dividend usually have stellar performance (based on return on assets) over the

previous year. It is found that firms chose to pay a special dividend when management does

believe it can sustain a permanent dividend increase or when the share price is not considered

undervalued by management. When management does not believe that their firm is undervalued,

but that their shares are possibly over-valued, they are unlikely to repurchase shares and

therefore are more likely to issue a special dividend with the excess cash. During the year before

a firm decides to pay a special dividend, it seems likely that the firm is achieving some sort of

operational success, measured by ROA (DeAngelo et al., 2000). Furthermore, Special dividends


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indicate current excess performance rather than expected improvement to long run performance.

No evidence is found that suggests further operational improvement after the announcement of

the special dividend. On average, investors cannot expect to have superior stock returns and

operational performance that precedes a special dividend to continue after the announcement.

Future studies provide the insight into firms in long term performance after the special dividend

(DeAngelo et al., 2000).

Choua, Liub, and Zantout (2009) analyzed the long-term stock performance of shares

following the payment of extraordinary and special dividends. They contest that no previous

studies use an appropriate timeline and sample size to ensure valid results. To ensure utmost

accuracy, the sample consisted of 2282 special U.S. cash dividends declared over the period

from 19262001 by NYSE, Amex and Nasdaq listed firms. The post-declaration long-term

abnormal returns are estimated by applying the Fama and French (1993) three-factor model. This

model is used with equally and value-weighted portfolio returns as well as with the ordinary- and

weighted-least-squares estimation procedures. The conclusion is that positive dividend news

relate to a statistically significant positive two-day abnormal return of 1.83%, with

approximately 59.20% of the abnormal returns being positive. Like many previous studies, they

found that in the long run there is no evidence of any stock price drift following declarations of

special U.S. cash dividends. This holds true even when the event is economically significant as

measured by the size of the special dividend, or by investors initial response to the declaration

(Fama and French, 1993).

It is important to note that equity shareholders of a firm are not the only stakeholders that

have a vested interest in a firms dividend policy. Bond holders are alsoconcerned with a firms

decisions regarding dividends. A study by Dhillon and Johnson (1994) compared the effects of


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dividend initiations, dividend increases, and dividend decreases to see how these changes affect

the price of the stock and the price of the bonds traded by the firm. Dividend initiations and

increases caused significant price increases for the corresponding stock. The firms bonds,

however, experienced negative returns that were not very significant. Evidence supporting

wealth redistribution hypothesis was found regarding the announcement of large dividend

changes. This was shown by the prices of bonds having the opposite price effects compared to

the stock prices (Dhillon & Johnson 1994).

Although some previous research supports the idea that the signaling power of dividends

has been decreasing, abnormal returns associated with special dividends are found in subsequent

studies. In a study conducted by Balachandran & Nguyen (2004), abnormal returns were

observed for firms that announced special dividends. The findings showed that the average

abnormal return from day 0 to day 1 was 3.43%. These results are significant at the 1% level

using a standardized t-test and generalized sign test. The research also looks at the effects of

corporate tax changes on special dividends. In the 13 year period analyzed, there were three

reductions in the corporate tax rate. The authors separated the results to show the four periods

with four different tax rates. The breakdown of the abnormal returns over the four periods is

3.4%, 4.7%, 3.3% and 3.5% respectively. These results are not statistically significant to show

whether changes in the corporate tax rate affect dividend returns (Balachandran & Nguyen,

2004).

An Australian study done by Balachandran, Faff, and Nguyen (2004) focused on whether

differences in abnormal returns associated with special dividend announcements existed among

industries. This study also regards whether intra-industry information is conveyed by the

announcements. The findings showed stronger significance for industrial firms than with


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financial and resource firms. This can be explained by the fact that market reaction to special

dividends is more dramatic for industrial firms.

James J. Park (2009) stated that an alternative way to view dividends is as a method of

reducing the agency costs associated with fraudulent activity. When a firms management team

uses the excess cash flows of the business in a way that harms shareholders, or if they improperly

report the financial condition of the firm to the public, investors are entitled to take legal action

against the firm in an effort to gain compensation for financial damages. However, this type of

shareholder compensation creates a circular problem, as investors are essentially suing the

business that they own, and therefore compensating themselves with funds that they already

own. Additionally, these funds will be no longer available for the firm to reinvest into profitable

projects, which further harms the investments of shareholders. This type of compensation also

has significant transaction costs, which take the form of legal fees that are charged by attorneys.

When shareholders are compensated via a legal settlement from their firm, these additional

qualities are not realized, and in fact the settlement will elicit a negative signal about the firms

management. However, the signaling impact of shareholders could improve in these situations if

management decides to take pre-emptive action to compensate investors in the form of a special

dividend instead of going to court over the issue. Doing so would allow shareholders to reduce

their transaction costs from legal fees, and would send a strong signal to the market that

management is now serious about acting in shareholders best interest and reducing agency costs

(Park, 2009).


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4.0 Key Research Question

This paper provides an analysis on the effects of special dividend announcements on the

stock price changes. The empirical evidence presented in the previous section indicates that the

announcement of a special dividend is related to a positive abnormal return on and around the

announcement date. Some studies argue that the price change is accounted for before the

announcement (Pettit, 1972). More recent studies show that there are consistent abnormal returns

associated around the day of special dividend announcements (Balachandran, Nguyen, 2004).

The consistencies of these positive abnormal returns are well documented for American firms

(DeAngelo, DeAngelo, Skinner, 2004).

After further review of the current literature, it was difficult to obtain special dividend

research regarding Canadian specific firms. One article was found regarding Australian firms,

which could help provide inference into the Canadian market. Australia and Canada have mildly

similar markets as both are heavily comprised of resource firms and operate under a similar

English common law legal system. The result from this Australian study proves that there is

sufficient evidence that the market reaction to special dividends is indeed stronger for industrial

non-financial firms and weaker for financial and resource firms (Balachandran, Faff, Nguyen,

2004).

The current lack of research for Canadian special dividend announcements is the primary

motivation for this study. There is also no current research regarding special dividend

announcements for small and medium market cap firms. These two reasons provide the

motivation for this study, which leads to the first research question. Are there positive abnormal

returns associated with the announcement of Canadian special dividend paying firms? Also, is

there a difference in abnormal returns between small, mid and large cap stocks?


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If abnormal returns are found for Canadian firms, predictive indicators will be then

chosen and studied for these firms. The literature describes that in order to pay a special

dividend; the firm usually must have high cash balances and great operating performance in the

prior year (DeAngelo, DeAngelo, Skinner, 2004). If this is the case, it should found that

Canadian special dividend paying firms abnormal returns should have some link to performance

indicators such as return on assets return on capital, debt to equity and current ratio.

4.1 Hypothesis

The primary Hypothesis is as follows:

H0: There are no abnormal returns associated with Canadian special dividend announcements.

Ha: There are abnormal returns associated with Canadian special dividend announcements.

It is expected that the share price increases during the development period. The signaling

theory provides some insight. The special dividend is a signal that the firm has ran out of good

projects to invest in, and does not believe that there is enough stable cash flows for the future to

issue a regular dividend or an increase. It is assumed that these firms have been exhausting their

good projects in the period prior to announcing the special dividend; while having good

operational performance. This should indicate positive price movements for the periods prior to

the special dividend.

5.0 Data Collection and Methodology

The initial sample for the purpose of this study was made up 147 Canadian companies

that are publicly traded on the Toronto Stock Exchange. These companies were all Canadian

listed and announced a special dividend between the years January 2005 and December 2012.

This period was chosen due to the lack of up to date special dividend research. Another reason


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for choosing a recent period is to possibly provide some insight into current market efficiency. A

filter was used to observe publicly listed companies which had voting rights, were listed as

common stock, were still in operation as of December 2012, and announced a special dividend

within the aforementioned time frame. A reason that only firms still in operation were chosen

was so that the research would provide useful information relating to stock returns when special

dividends are paid in the normal course of business, and not simply paid out as a means of

liquidating the firm. Also, firms that have since gone bankrupt may have been in severe distress

at the time of their most recent special dividend and thus investors may have reacted differently

to these types of stocks. The sample was further narrowed by eliminating all income trust

investment funds and companies that had other events around the time of the special dividend

announcement. Failure to eliminate this noise would result an increase in abnormal returns

around the event date (Seiler 2000). The events eliminated included earnings announcements,

stock splits, executive resignations, M&A activity or other significant events that would create

unrelated returns in our sample. After this was completed, the sample was reduced to 51

companies that would be used to test the markets reaction to a special dividend announcement.

In order to determine whether or not market capitalization has an impact on the abnormal

returns realized after the announcement of a special dividend, it is crucial to define the levels of

market cap for the purpose of this study. It is determined that micro cap firms are defined to have

a market cap less than $300 million (CDN), small cap firms have a market cap of $300 million to

$2 billion, mid cap firms have a market cap of $2-$10 billion, large cap firms have a market cap

of $10-$200 billion and finally, mega cap firms have a market cap greater than $200 billion

(Scottrade, 2013). Fitting the aforementioned sample size of 51 firms into such categories, the

following division of market cap was determined:


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# FirmsMicro < $300 M 22Small $300 M to $2 B 15

Mid $2-10 B 11

Large $10-200 B 3

Sum of sample size 51

There were no mega cap firms included in the sample; thus, this particular level of market

capitalization will not be analyzed within the study on Canadian firms.

The analysis will be broken down into 2 periods. The first is a development period, where the

expected return will be calculated by running a regression on each of the stocks in the sample

over a 3 year period. A single factor model will be used to estimate alpha and beta for each

observation.

Rit =1 +1Rmt + eit

This development period will end 150 days before the event date, which will be the actual

announcement of a new special dividend. The period of 150 days will be used as a quiet period

to ensure that there is no early reaction in the weeks or months before the announcement. The

alpha and beta calculations from the earlier development period will then be used to calculate the

expected return during the test period.

E(R) = * + *(E(Rm))


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These expected returns will then be compared to the actual returns around the day of the special

dividend announcement for each observation. Any abnormal returns occur prior, during or after

the announcement will be recorded. Abnormal returns in the days after the announcement would

show that an investor could potentially profit from the announcement of a special dividend.

The significance of the results by looking at the distribution of the returns will then be

tested. Any major outliers will be analyzed and potentially removed if they skew results. A t-test

will be run to test the significance of the results. This will be done by dividing the average

abnormal return for all observations by the standard error.

T-Stat =

Various significance levels such as 10%, 5% and 1% will be applied in order to test the

results. A higher significance level would increase the possibility that the null hypothesis (there

are no abnormal returns post-announcement) will be rejected, when it was in fact true.

After looking at the sample results, further tests will be done to analyse the variables that

impact the abnormal returns due to a special dividend analysis. Testing variables such as market

cap, debt to equity ratio, return on assets, return on equity, and current ratio will also be done

within this report. For a market condition test, the test period will be broken down into two

conditions. The first being all special dividends announced before March 6th 2009, whereas the

second will be the period after. These periods were chosen because the Toronto Stock Exchange

reached its lowest point on this date. This breakdown will allow us to look at the effects of

special dividend announcements in a declining stock market versus announcements during a

rising market.


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Dummy variables (D1, D2 and D3) will be used in our regression to isolate the impact of

the variables. For example, small cap stocks would use D1=1, D2=0 & D3 =0. The regression

would then show how each one specific variable would impact the abnormal returns.

Yi =1 +2D2 +3D3 + X i + ei

The significance of each output will then be tested in order to analyse if trends were

applicable to certain conditions or whether particular ratios lead to higher abnormal returns. The

various statistical tests will demonstrate if the results are statistically significant. If the results

are statistically significant, it could then be determined whether they are economically

significant.

The regressions will be run on our various variables for three different time periods. One day,

three day and 11 day time horizons will be used for our analysis.

6.0 Signaling Effect

In order to determine whether the signaling effect can be observed for the data set in this

study, the EPS was gathered for each firm for the quarter before the announcement was made

along with the most recent quarter post-announcement. The calculation of the cumulative

average for the growth of EPS over this period resulted in a growth rate of 44.83%. Looking

forward another period, the growth of EPS increased further by an average of 111.89%. These

results are consistent with previous studies that a signaling effect exists with the announcement

of a special dividend. However, it is crucial to determine whether the payment of a special

dividend for Canadian firms results in only a temporary earnings increase as previous studies

have concluded. Thus, looking beyond the six months studied for short term earnings increases,


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the second quarter after the special dividend announcement confirmed previous studies. The

average EPS growth rate during this period was -50.93%. This solidifies the fact that special

dividend announcements signal positive earnings growth; however, this is only evident within

the first two quarters post announcement. In the periods after, EPS drop significantly thereby

consistent with the fact that earnings increases following a special dividend announcement are

only temporary (please refer to Appendix B: EPS and Signaling Effect for details).

7.0 Regression Results

A single factor regression was used to determine the T-stat of the model. The results obtained for

different windows examined were as follows:

Beginning Day

Number848 820 840 820 1

Ending Day Number 848 853 850 821 851

T- Statistics 3.25758 1.55199 0.79739 0.23529 0.04539

It is therefore concluded that statistically significant abnormal returns are witnessed on the

announcement date (day=848). Using the single factor model, the null hypothesis was rejected in

favour of Ha: there are abnormal returns associated with Canadian special dividend

announcements. The cumulative average abnormal return at the end of this trading day is equal

to 1.75%. Looking to see if such a pattern can be observed for days before or after this date, it is

concluded that no statistically significant abnormal returns are observed beyond the one day

scope. Next, the report will continue to analyze certain variables to see whether significance can

be extracted from the regression results.


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7.1 Capital Structure: Debt to Equity

As mentioned previously, the signalling effect shows that the announcement of a special

dividend usually means the earnings are expected to increase within the next quarter. However,

as the pecking order model predicts, short-term variation in earnings is primarily absorbed by

debt (Fama & French, 2002). Thus, it is predicted that a higher debt to equity ratio will

negatively impact abnormal returns since investors believe that although the firm is signaling

higher future earnings, their high leverage will end up depleting such benefits before

shareholders are able to gain from it. Similarly, investors prefer that firms with high amounts of

debt use the excess cash to pay it off. Thus, releasing a special dividend may have an adverse

affect on abnormal returns for companies with high debt to equity ratios. The following

regression output shows the abnormal returns on stocks for the 5 days before and 5 days after a

special dividend announcement for firms with varying debt to equity ratios at the time of the

announcement. Stocks were grouped into percentages of 0-30.99%, 31-99.99% and 100% and up

(meaning that creditors have more money invested in the company than investors).

Debt to Equity11 Day Abnormal Return

The results below show no significance for any of the current ratio groupings over the 11-

day period. The p-values for all three categories are statistically insignificant. However,

companies which have D/E ratios of 32-100% exhibit the highest p-values and remain consistent

with the pecking order theory.

SUMMARY OUTPUT

Regression Statistics

Multiple R 0.265595671

R Square 0.07054106Adjusted RSquare 0.018904453


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StandardError 0.102323482

Observations

Coefficients

Standard

Error t Stat P-value Lower 95% Upper 95%

Lower

95.0% Upper 95.0%

Intercept -0.0555297 0.041773387 -1.3293081 0.19210944 -0.14025006 0.029190654 -0.14025006 0.029190654

0-30.99% 0.070141412 0.047366568 1.480821066 0.147354128 -0.02592244 0.166205265 -0.02592244 0.166205265

31-99.99% 0.080626928 0.051161741 1.575922291 0.123791963 -0.02313389 0.184387749 -0.02313389 0.184387749


By minimizing the abnormal return period to 3 days, the statistical significance drops

drastically in comparison to the 11 day abnormal returns. None of the p-values are significant at

the 95% level regardless of the capital structure. These insignificant results, as witnessed in the

11 day period as well, can be explained by market efficiency.

SUMMARY OUTPUT



R Square 0.0263790Adjusted RSquare -0.0277109

StandardError 0.072121924

Observations 39

Coefficients

Standard

Error t Stat P-value

Lower

95% Upper 95%

Lower

95.0%

Upper

95.0%

Intercept 0.022149473 0.02944365 0.75226648 0.45678158-

0.0375650 0.08186396-

0.0375650 0.08186396

0-30.99% -0.00383781 0.03338596-

0.11495272 0.90912137-

0.0715476 0.06387206-

0.0715476 0.06387206

31-99.99% 0.021559372 0.036060962 0.59785903 0.55367668-

0.0515756 0.09469439-

0.0515755 0.09469439


Contrary to what was expected, firms with a debt to equity ratio of 100% or more

exhibited significantly positive abnormal returns. Additionally, although D/E ratios of 31-

99.99% were not statistically significant, the p-value was relatively strong at 0.084. Potential


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reasons for this anomaly could be that the firms included in this subgroup were at an optimal

ratio and were able to meet interest payments thus allowing for excess cash payments to

investors.

SUMMARY OUTPUT



R Square 0.08064487Adjusted RSquare 0.02956959StandardError 0.05650365

Observations 39

Coefficients

Standard

Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%Intercept 0.060039874 0.02306752 2.602788425 0.013344366 0.013256775 0.106822974 0.013256775 0.106822974

0-30.99% -0.03302591 0.026156109 -1.26264605 0.214834274 -0.08607296 0.02002114 -0.08607296 0.02002114

31-99.99% -0.05020003 0.028251827 -1.77687724 0.084039544 -0.10749739 0.007097333 -0.10749739 0.007097333

7.2 Return on Assets

By observing the ROA of a firm in the year prior to the announcement of a special

dividend, excellent performance can be used as a factor to determine significant abnormal

(DeAngelo, DeAngelo, Skinner, 2000). Companies were divided in categories of less than 5%, 5-

10%, and greater than 10% ROA in the year prior to special dividend announcement. Notably,

industry effects can definitely impact the results of such results among many other reasons.

ROA- 11 Day Abnormal Returns

Looking at the 95% level, none of the p-values are statistically significant. This can

surely be applied to the market efficiency hypothesis which states that the price of the stock

reflects all currently available information. Thus, the ROA made public to investors a year prior

to the dividend announcement has already been included in the price.


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SUMMARYOUTPUT




Observations 39

Coefficients

Standard

Error t Stat P-value Lower 95% Upper 95%

Lower

95.0% Upper 95.0%

Intercept -0.03826213 0.027677272 -1.3824386 0.17535404 -0.09439424 0.01786998 -0.09439424 0.01786998


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ROA- 1 Day Abnormal Returns

Finally, it was interesting to see that having an ROA of 10% or more was statistically

significant at the 95% level with a p-value of 0.00895. Similarly, a firm with an ROA of 5-10%

also exhibits positive abnormal returns on the day around the announcement date. Thus,

excellent performance of the special dividend issuing firm in the year prior to the announcement

is a good indicator of abnormal return for the one day period post-announcement.

SUMMARY OUTPUT


Multiple R0.36019280

8

R Square0.12973885

9Adjusted RSquare

0.081391018

StandardError

0.054974296

Observations 39

Coefficients

Standard

Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%

Intercept 0.042135726 0.015247126 2.763519167 0.008954052 0.011213121 0.073058332 0.011213121 0.073058332


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dividend when they have a low current ratio, we would expect the market to react more

negatively than to firms who have strong current ratios. The following regression output shows

the abnormal returns on stocks for the 5 days before and 5 days after a special dividend

announcement for firms with various current ratios at the time of the announcement. Stocks were

grouped into current ratio classifications of less than 1 (meaning these firms are illiquid or

possibly insolvent), as well as between 1 and 2, and anything greater than a ratio of 2.

Current Ratio -11 day abnormal returns

Although our hypothesis seems to make sense intuitively, the results below show no

significance for any of the current ratio groupings over the 11-day period. The p-values for all

three categories are statistically insignificant.

SUMMARY OUTPUT



R Square 0.04212537Adjusted R

Square -0.01108989StandardError 0.103875839

Observations 39

CoefficientsStandard

Error t Stat P-value Lower 95% Upper 95%Lower

95.0% Upper 95.0%

Intercept 0.022763997 0.025193591 0.903563004 0.372233936-

0.02833097 0.073858969-

0.02833097 0.073858969


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0.0328. However, this result could also include the effects of other factors in addition to having a

current ratio greater than 2. For stocks with a current ratio less than 2, the 3-day abnormal return

results were insignificant at the 95% level again.

SUMMARY OUTPUT




Observations 39

Coefficients StandardError t Stat P-value Lower 95% Upper 95% Lower95.0% Upper95.0%

Intercept 0.037779848 0.017027277 2.218783933 0.032893962 0.00324693 0.072312766 0.00324693 0.072312766


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The regression output below provides the results for each of the three ROC categories for

the abnormal returns over the 5 days before and the 5 days following the special dividend

announcement. Over this longer event horizon none of the three ROC levels proved to be

statistically significant at the 5% level, given their p-values of 0.434 or greater.

SUMMARY OUTPUT



R Square 0.017118244Adjusted RSquare -0.0374863Standard

Error 0.10522304Observations 39



95.0% Upper 95.0%

Intercept 0.018720314 0.024815036 0.754393975 0.455519401-0.03160691 0.06904754

-0.03160691 0.06904754

< 5 -0.03184848 0.04027805 -0.79071555 0.434288418-

0.11353615 0.049839191-0.11353615 0.049839191

5.0-10.0 -0.01048197 0.04152329 -0.2524359 0.802139932 -0.0946951 0.073731166 -0.0946951 0.073731166

Return on Capital - 3 day abnormal returns

The next output shows the regression results of ROC vs. stock abnormal returns for time

period between the day before the announcement, and the day following the dividend

announcement. Again, the results were insignificant at the 5% level, although the p-value is

stronger for firms with an ROC less than 5%, vs. the firms with ROCs between 5% and 10%;

this is in line with the hypothesis that firms with lower ROC performance will see more

favorable stock reactions when a dividend is announced. However, the intercept incorporates

firms with ROCs greater than 10% among other factors, and has the strongest p-value of all,

which is inconsistent with the notion that high ROC firms will not be favored to pay special

dividends. Perhaps the intercept coefficient is capturing too many other variables to pinpoint the

effect that high a high ROC has on a stocks reaction.


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SUMMARY OUTPUT

Regression StatisticsMultiple R 0.20446179

R Square 0.041804623Adjusted RSquare -0.01142845StandardError 0.071008445

Observations 39



95.0%Upper

95.0%

Intercept 0.020298342 0.016746115 1.212122427 0.233361015-0.01366435 0.054261037

-0.01366435 0.054261037

< 5 0.0237694 0.027181135 0.874481485 0.387652912 -0.0313565 0.078895297 -0.0313565 0.078895297

5.0-10.0 -0.01435366 0.02802147 -0.51223792 0.611612982

-

0.07118383 0.042476516

-

0.07118383 0.042476516

Return on Capital - 1 day abnormal return

For abnormal returns on the day of the special dividend announcement there are mixed

results when regressed against ROC levels. Firms within the lowest ROC category produce a

very weak, but positive relationship with abnormal returns, while stocks with an ROC between

5% and 10% are slightly negatively correlated with abnormal returns, as given by their

coefficients. The intercept is significant at the 5% level, and shows a positive relationship of

0.03069 between ROCs greater than 10% and abnormal stock returns on the day of a special

dividend announcement.


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SUMMARY OUTPUT



Observations 39



95.0%Upper

95.0%

Intercept 0.03069121 0.013416954 2.287494515 0.028147903 0.003480365 0.057902054 0.003480365 0.057902054

< 5 0.011413468 0.021777472 0.524095178 0.603424439 -0.03275329 0.055580229 -0.03275329 0.055580229

5.0-10.0 -0.0276618 0.022450747 -1.23211054 0.225894877 -0.07319403 0.017870423 -0.07319403 0.017870423

7.5 Two Period Analysis

It was found that within the sample of 51 Canadian special dividend announcements,

abnormal returns were materially different for upward and downward trending markets. The

lowest point for the S&P TSX index during the financial crisis was around March 6 th, 2009, and

the market has since recovered quite significantly. Firms that announced special dividends before

this low point, essentially during the downward trend towards the bottom, experienced an

average 11-day cumulative abnormal return of -1.32%. However, announcements that were

made during the market recovery generated an average 11-day cumulative abnormal return of

+2.32%. Thus, there seems to be a strong indication that the stock market reacts quite differently

to the announcement of special dividends during falling and rising markets. The results are rather

intuitive, in that it would be expected that firms would be in a better position to pay a special

dividend during expansionary periods, and that they should conserve cash when the economy is

faltering. A regression analysis of this finding is provided below. Unfortunately the model does

not provide strong support for the theory that market trends have a significant impact on stock

price reactions to special dividend announcements.


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SUMMARY OUTPUT



Observations 51



95.0% Upper 95.0%

Intercept 0.023203533 0.015047097 1.542060441 0.129492957-0.00703474 0.053441807

-0.00703474 0.053441807

pre mar 6th 2009 -0.03639436 0.029803422 -1.22114704 0.227873624-

0.09628658 0.023497859-0.09628658 0.023497859

7.6 Market Capitalization

Further analysis of the data found that the average abnormal returns seemed to differ for

each different market cap size. Of the 51 firms analyzed, 25 were considered micro caps

(


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8.0 Limitations and Considerations for Further Research8.1 Special Dividend Data

One major limitation of our study is the lack of large cap stocks within our sample. As a

result we were unable to make any inferences to Canadian large cap special dividend

announcements. A potential extension is to increase our timeline to allow larger cap equities in

the study. However, there is one restraint when increasing our timeline.

8.2 Long term effects

Another limitation is that due to our recent data set we are unable to look at the long term

performance of special dividend paying firms after the special dividend announcement. This

restricted the study to only look at previous data and have little comparison to the future

fluctuations of the price in the long run; which is considered to be three years by previous

studies. An extension can be included in 2015 when the long run effects for 2012 announcement

firms information can be extracted from the market.

SUMMARY OUTPUT



R Square 0.043686186

Adjusted R Square 0.003839777

Standard Error 0.059912596

Observations 51

ANOVA

df SS MS F Significance F

Regression 2 0.007870842 0.003935421 1.096364456 0.342302678

Residual 48 0.172296917 0.003589519

Total 50 0.18016776

Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%

Intercept 0.001131209 0.022644833 0.049954384 0.960366034 -0.044399279 0.046661696 -0.044399279 0.046661696

Micro 0.011260476 0.025619704 0.439524065 0.662254377 -0.04025139 0.062772343 -0.04025139 0.062772343

Small 0.033334012 0.026489819 1.258370692 0.214344318 -0.019927339 0.086595362 -0.019927339 0.086595362


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8.3 Variables

In regards to the results for the firm performance variables we were unable to find strong

significance in regards to abnormal returns.

An extension to this part of the study is to perhaps use a different approach to predict

these variables affects on abnormal returns is to relate the timeframe in which these variables are

extracted and categorize them. The changes in markets were only applied to changes in the stock

price within this study; which proved to be insignificant. By selecting different sub-sampling

periods within the market ,there is a different influence each variable may have during different

stages within the markets (Chou, Liu, Zantout, 2007).

Another potential extension can be using a cross sectional logit regression (Bulan,

Subramanian, Tanlu, 2007). This would find the correlation between variables as well as

abnormal returns. If there are little to no significance between the current variables and abnormal

returns the results of the correlations between variables may reveal significant data in the

reactions of the market caused by special dividends.

A last potential extension is adding a hazard model. The hazard model estimates the

probability that a firm will initiate a dividend as a function of various firm characteristics,

relative to other firms that are at the same stage in their life-cycle (Bulan, Subramanian, Tanlu,

2007). This can help aid the assumptions on why special dividends may be released and help in

predicting future special dividend announcements.

8.4 Signalling

Some of the limitations on trying to capture the signalling effect is that each sectors

quarter earnings may give out a different signal itself which may skew the data. For example,

final quarters are historically strong quarters (Brown et al., 2012), if the special dividend is

released prior to the final quarter, the extra earnings seen in comparison to the previous quarter


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can be the normal cycle of when sales increase. Another example is that retail stores also

experience higher than average in sales through the months of November and December (Brown

et al., 2012), this is another factor that can change the results of our measure for capturing the

signal sent to the market.

9.0 Conclusion

The overall conclusion for this report is that there are abnormal returns associated with

the announcement of Canadian special dividends. These results were only significant on the

announcement day itself. This gives credence to the fact that the Canadian stock market is

strong form efficient. Economic profits cannot be realized by trading on an announcement of a

special dividend. This is because the stock price fully adjusts on the announcement date. This

study also concludes that small cap stocks experience larger abnormal returns than micro or mid-

cap stocks. With that said, there is still weak statistical results between the relationship of the

market cap size of the firm and return.

The results when analyzing our performance variables were mixed. ROA was significant

for one day returns. The debt to equity ratio showed no significant relationship with abnormal

returns. The current ratio overall gave mixed results which were inconclusive. Lastly, ROC was

found significant positive correlation with the abnormal returns.

This work allows for comparison between the Canadian market and previous studies

conducted on the U.S. market. There are many similarities between both exchanges, such as the

fact that both markets experienced significant abnormal returns on the special dividend

announcement date. Both countries have shown that the markets are very efficient since stock

prices adjust to the announcement and stabilize at a new equilibrium. Technology advancements

over the last few decades have increased the pace of information sharing. Since this study only


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looked at events after the year 2005, one would expect that news of the special dividend

announcement to quickly reach investors. Future studies could look at an earlier time period to

see if the Canadian stock market has become more efficient due to the advent of the Internet and

other media sources. Further extensions would also be to look at other explanatory variables and

study the long term effects of special dividends on firms.


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10.0 Appendix

Appendix A: Sample Set Information

Ticker Firm Name Event Date MarketCap

ROA D/E ROC

TSX:YRI Yamana Gold, Inc. 11/04/2010 (Special

Dividend Announced)

Yamana Gold, Inc. Declares

Quarterly Dividend Payable

on January 14, 2011 ;

Declares Special Dividend

Payable on November 26,

2010

8,620

3.03 7.16 3.97

TSX:VRX Valeant Pharmaceuticals International,

Inc.

11/04/2010 (Special

Dividend Announced)

Valeant Pharmaceuticals

International, Inc. DeclaresSpecial Dividend, Payable

on December 22, 2010

8,370

2.6 60.48 3.34

TSX:CG Centerra Gold Inc. 04/30/2011 (Special

Dividend Announced)

Centerra Gold Inc. Declares

Annual and Special

Dividends, Payable on May

18, 2011

4,152

14.23 15.44

TSX:HSE Husky Energy Inc. 02/05/2007 (Special

Dividend Announced)

Husky Energy Declares

Quarterly and Special

Dividend Payable on April 3,

2007

3,037

13.36 17.13 21.66

TSX:BNP Bonavista Energy Corporation 09/15/2008 (Special

Dividend Announced)

Bonavista Energy Trust

Announces Monthly Cash

Distribution and

Supplementary Distribution

Payable on October 15,

2008

2,541

5.52 52.87 7.11

TSX:BEI.UN Boardwalk Real Estate Investment Trust 08/12/2010 (Special

Dividend Announced) 2,167

4.99 5.35

TSX:RUS Russel Metals Inc. 08/06/2008 (Special

Dividend Announced)

Russel Metals Inc. Declares

Quarterly Common Share

Dividend and Supplemental

Dividend, Payable on

September 15, 2008

1,810

10.55 19.19 14.64

TSX:PEY Peyto Exploration & Development Corp 12/14/2007 (Special

Dividend Announced)

Peyto Energy Trust

Announces December 2007

Cash Distribution and

1,760

11.21 107.16 14.66


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Special Distribution, Payable

on January 15, 2008

TSX:SII Sprott Inc. 03/23/2011 (Special

Dividend Announced)

Sprott Inc. Declares Special

Annual and Fourth Quarter2011 Dividend, Payable on

April 15, 2011

1,573

na na na

TSX:SCL.A ShawCor Ltd. 05/12/2009 (Special

Dividend Announced)

ShawCor Declares Quarterly

and Special Recognition

Dividends Payable on 29

May 2009

1,525

11.12 12.15 16.05

TSX:KEY Keyera Corp. 11/04/2009 (Special

Dividend Announced)

Keyera Facilities Income

Fund Declares Regular and

Special Distribution Payableon December 15, 2009

12/21/2007 (Special

Dividend Announced)

Keyera Facilities Income

Fund Declares Special

Dividend Payable on

January 2, 2008

1,366

7.8 71.42 10.75

TSX:TFI TransForce Inc. 02/26/2007 (Special

Dividend Announced)

Transforce Income Fund

Announces Earnings Results

for the Fourth Quarter and

Full Year Ended December31, 2006 ; Declares Regular

Monthly Distribution

Payable on April 13, 2007;

Declares Special

Distribution

1,230

8.88 71.33 11.24

TSX:PD Precision Drilling Corporation 12/25/2008 (Special

Dividend Announced)

Precision Drilling Trust

Anticipates January 2009

Cash Distributions ; Declares

Special Dividend Payable on

January 15, 2009

1,144

11 16.79 13.44

TSX:BIN Progressive Waste Solutions Ltd. 10/30/2009 (Special

Dividend Announced)

IESI-BFC Ltd. Declares

Quarterly Dividend and

Special Dividend, Payable

on January 15, 2010 and

Payable on December 31,

2009, Respectively

1,141

4.03 63.29 4.75


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TSX:GMP GMP Capital Inc. 12/21/2007 (Special

Dividend Announced)

GMP Capital Trust Declares

Monthly Dividend Payable

on January 18, 2008;

Declares Special Cash

Distribution Payable on

January 18, 2008

1,060

18.45

TSX:GNV GENIVAR Inc. 12/20/2010 (Special

Dividend Announced)

GENIVAR Income Fund

Announces December 2010

and Special Distributions,

Payable on January 17, 2011

816 7.47 12.95 9.5

TSX:FRU Freehold Royalties Ltd. 11/11/2009 (Special

Dividend Announced)

Freehold Royalty Trust

Reports Earnings Results for

the Third Quarter and Nine

Months Ended September

30, 2009; Declares

November 2009

Distribution; Announces

Executive Changes; Provides

Capital Expenditure

Guidance for the Fourth

Quarter of 2009; Revised

Capital Program for the Year

2009; Approves Capital

Budget for 2010; Declares

Extra Dividend

755 4.29 76.52 5.2

TSX:XSR Sirius XM Canada Holdings Inc. 11/20/2012 (Special

Dividend Announced)

Canadian Satellite RadioHoldings Inc. Declares

Special Cash Dividends and

Quarterly Dividends Payable

on January 2, 2013 and

January 2, 2013,

Respectively

714 0.77 320.39 1.64

TSX:CMG Computer Modelling Group Ltd. 05/24/2012 (Special

Dividend Announced)

Computer Modelling Group

Ltd. Reports Audited

Consolidated Earnings

Results for the Fourth

Quarter and Full Year Ended

March 31, 2012; DeclaresQuarterly Dividend and

Special Dividend, Payable

on June 15, 2012

668 33.34 50.02

TSX:WJX Wajax Corporation 12/15/2010 (Special

Dividend Announced)

Wajax Income Fund

Announces Special Cash

Distribution, Payable on

623 6.62 37.5 10.83


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January 20, 2011; Provides

Dividend Guidance for the

Months January and

February 2011

TSX:CDL.A Corby Distilleries Limited 11/07/2012 (Special

Dividend Announced)

Corby Distilleries Limited

Reports Unaudited


Results for the First Quarter

Ended September 30, 2012;

Declares Quarterly Dividend

and Special Dividend,


2012 and January 10, 2013

Respectively

500 7.84 9.02

TSX:ARF Armtec Infrastructure Inc 12/16/2009 (Special

Dividend Announced)

Armtec Infrastructure

Income Fund Declares

Special Distribution Payable

on January 15, 2010;

Declares Regular Cash

Distribution for December

2009 Payable on January 29,

2010

474 5.45 86.91 7

TSX:HRX Heroux-Devtek Inc. 11/09/2012 (Special

Dividend Announced)

Heroux-Devtek Inc.

Announces Unaudited

Consolidated Financial

Results for the SecondQuarter and Six Months


Provides Sales Guidance for

the Fiscal Year Ending

March 31, 2013; Proposes

Special Cash Dividend, to be


2012

416 4.8 16.62 6.6

TSX:GLN Glentel Inc. 10/26/2012 (Special

Dividend Announced)

Glentel Inc. Declares Special

Dividend

355 10.77 23.8 21.06

TSX:CTU.A Le Chateau Inc. 06/05/2008 (SpecialDividend Announced)

Le Chateau Inc. Reports

Earnings Results for the First

Quarter Ended April 26,

2008; Declares Regular

Quarterly Dividend and

Special Dividend Payable on

August 19, 2008

327 16.86 27.47 21.67


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TSX:DCI DirectCash Payments Inc. 11/18/2010 (Special

Dividend Announced)

DirectCash Income Fund



February 28, 2011

293 10.17 42.72 12.31

TSX:FC Firm Capital Mortgage Investment

Corporation

12/18/2012 (Special

Dividend Announced)Firm Capital Mortgage

Investment Corporation

Announces Cash Dividend

for the Month of December

2012 and Estimated Special

Year-End Dividend, Payable

on January 15, 2013

231 5.87 61.68

TSX:AVF AvenEx Energy Corp. 12/16/2008 (Special

Dividend Announced)

Avenir Diversified Income

Trust Declares December


January 15, 2009 ; Declares

Special Distribution Payable

on February 16, 2009

217 6.21 17.66 10.1

TSX:BRE Brookfield Real Estate Services Inc. 12/11/2010 (Special

Dividend Announced)

Brookfield Real Estate

Services Fund Announces

Regular and Special


January 28, 2011

182 7.45 93.82 7.96

TSX:MPC Madison Pacific Properties Inc. 09/26/2011 (Special

Dividend Announced)

Madison Pacific PropertiesInc. Declares Special

Dividend

158 2.8 69.3 2.92

TSX:CSF The Cash Store Financial Services, Inc. 08/27/2009 (Special

Dividend Announced)

The Cash Store Financial

Services Inc. Declares

Regular and Special


September 24, 2009

155 21.46 2.16 25.66

TSX:PWC Pacific & Western Credit Corp. 01/25/2007 (Special

Dividend Announced)

Pacific & Western Declares

Special Dividend Payable onMarch 7, 2007

154 1.35

TSX:GCL Colabor Group Inc. 07/08/2009 (Special

Dividend Announced)

Colabor Income Fund

Announces Intention to

Convert from an Income

Trust Structure to a

Corporation ; Declares

Special Dividend, to be Paid

146 4.55 84.18 6.85


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on or Around September

15, 2009

TSX:SRF Sun-Rype Products Ltd. 02/28/2007 (Special

Dividend Announced)

Sun-rype Products Ltd.


the Fourth Quarter and Full

Year Ended December 31,

2006 ; Declares Quarterly

Dividend Payable on March

15, 2007 ; Announces

Special Dividend

143 10.74 1.58 15.67

TSX:CTY Calian Technologies Ltd. 11/12/2009 (Special

Dividend Announced)

Calian Technologies Ltd.

Declares Quarterly Dividend

and Special Dividend


2009

141 15.74 26.71

TSX:AHF Aston Hill Financial Inc. 03/11/2011 (Special

Dividend Announced)

Aston Hill Financial Inc


Dividend, Payable on March

31, 2011

121 6.82 3.96 7.57

TSX:HPS.A Hammond Power Solutions Inc. 05/25/2009 (Special

Dividend Announced)

Hammond Power Solutions

Inc. Declares Special Cash

Dividend Payable on July 15,

2009

104 17.59 10.46 24.01

TSX:MCB McCoy Corp. 03/18/2011 (SpecialDividend Announced)

McCoy Corp. Reports

Earnings Results for the

Fourth Quarter and Full

Year Ended December 31,

2010; Provides Earnings

Guidance for the Full Year

of 2011; Declares Special

Dividend Payable on April

11, 2011; Announces

Impairment Charge for the

Fourth Quarter of 2010

104 7.13 10.63 9.03

TSX:GDL Goodfellow Inc. 04/13/2010 (Special

Dividend Announced)Goodfellow Declares Special

Dividend, Payable on May

14, 2010

100 6.71 21.39 8.29

TSX:JOV Jovian Capital Corporation 11/19/2012 (Special

Dividend Announced)

Jovian Capital Corporation



83 -5.11 5.04 -7.13


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December 13, 2012

TSX:CXS Counsel Corporation 11/12/2012 (Special

Dividend Announced)

Counsel Corporation

Reports Unaudited


Results for the Third

Quarter and Nine Months


Declares Special Dividend,

Payable on January 1, 2013

81 18.39 31.12

TSX:RYL Royal Host Inc. 02/28/2009 (Special

Dividend Announced)

Royal Host REIT Announces

Final 2008 Special

Distribution, Payable on

April 30, 2009

54 1.93 662.78 2.09

TSX:CXA.B Consolidated HCI Holdings Corporation 02/14/2012 (SpecialDividend Announced)

Consolidated HCI Holdings

Corp. Announces Special

Dividend, Payable on March

5, 2012

53 0.92 10.56 0.98

TSX:GDS Gendis Inc. 01/10/2012 (Special

Dividend Announced)

Gendis Inc. Declares Special


January 31, 2012

52 -8.04 18.61 -8.5

TSX:AM Automodular Corp. 11/06/2012 (Special

Dividend Announced)

Automodular Corp.Announces Earnings Results

for the Third Quarter and

Nine Months September 30,

2012; Declares Quarterly

Dividend and Special

Dividend, Payable

December 4, 2012

40 26.78 0.08 37.66

TSX:PIC.A Premium Income Corporation 01/26/2009 (Special

Dividend Announced)

Premium Income Corp.


the Year Ended October 31,

2008 ; Declares Ordinaryand Special Distributions

36 -9.98 362.62 -10.34

TSX:GDI General Donlee Canada Inc 03/09/2009 (Special

Dividend Announced)

General Donlee Income

Fund Declares February

Cash Distribution and

Special Cash Distribution for

29 10.78 1164.51 12.15


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the Year 2008 Payable on

March 31, 2009

TSX:TVK TerraVest Capital Inc. 12/21/2011 (Special

Dividend Announced)

TerraVest Income Fund

Declares Second SpecialDistribution Payable on

January 11, 2012

25 4.73 19.96 5.66

TSX:LCS Brompton Lifeco Split Corp. 03/21/2011 (Special

Dividend Announced)

Brompton Lifeco Split Corp.

Suspends A Class

Distribution

10 1.56 225.2 1.6

TSX:DOM.UN Dominion Citrus Limited 12/20/2011 (Special

Dividend Announced)

Dominion Citrus Limited

Announces Special


January 16, 2012;Announces Board of

Trustees Appointments

6 5.18 15.85

TSX:WTE Westshore Terminals Investment

Corporation

03/19/2008 (Special

Dividend Announced)

Westshore Terminals

Income Fund Declares

Quarterly Cash Dividend

and Special Dividend

Payable on or Before April

15, 2008

1 6.37 7.23


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Appendix B: Earnings per Share and Signaling Effect

Earnings Per Share Growth

Ticker (-1 quarter) announcement (+1 Quart) (+2 Quarts) t=0 t=1 t=2

TSX:YRI0.17 0.2 0.26 0.16 17.65% 30.00% -38.46%

TSX:VRX-0.1 0.02 0.19 0.13 -120.00% 850.00% -31.58%

TSX:CG0.58 0.3 0.35 0.34 -48.28% 16.67% -2.86%

TSX:HSE0.64 0.77 0.85 0.91 20.31% 10.39% 7.06%

TSX:BNP1.77 1.09 0.28 0.01 -38.42% -74.31% -96.43%

TSX:BEI.UN1.02 15.1 4.12 3.54 1380.39% -72.72% -14.08%

TSX:RUS1.45 0.48 -0.92 -0.41 -66.90% -291.67% -55.43%

TSX:PEY0.54 0.37 0.37 0.69 -31.48% 0.00% 86.49%

TSX:SII0.07 0.04 0.06 0.03 -42.86% 50.00% -50.00%

TSX:SCL.A0.45 0.49 0.48 0.44 8.89% -2.04% -8.33%

TSX:KEY0.55 0.6 0.42 0.54 9.09% -30.00% 28.57%

TSX:TFI0.64 0.24 0.31 0.33 -62.50% 29.17% 6.45%

TSX:PD0.68 0.3 0.23 0.26 -55.88% -23.33% 13.04%

TSX:BIN0.2 0.11 0.18 0.21 -45.00% 63.64% 16.67%

TSX:GMP0.38 0.33 0.25 0.11 -13.16% -24.24% -56.00%

TSX:GNV-0.06 0.62 0.38 0.54 -1133.33% -38.71% 42.11%

TSX:FRU0.16 0.29 0.2 0.23 81.25% -31.03% 15.00%

TSX:XSR0.01 0.02 0.89 0.02 100.00% 4350.00% -97.75%

TSX:CMG0.18 0.12 0.16 0.2 -33.33% 33.33% 25.00%

TSX:WJX1.18 0.95 0.77 0.99 -19.49% -18.95% 28.57%

TSX:CDL.A0.16 0.17 0.25 0.32 6.25% 47.06% 28.00%

TSX:ARF-0.52 0.37 0.43 0.29 -171.15% 16.22% -32.56%

TSX:HRX0.21 3.68 0.15 0.22 1652.38% -95.92% 46.67%

TSX:GLN0.01 0.01 0.1 0.08 0.00% 900.00% -20.00%

TSX:CTU.A0.25 0.39 0.49 0.23 56.00% 25.64% -53.06%

TSX:DCI-0.61 0.25 0.28 0.32 -140.98% 12.00% 14.29%

TSX:FC0.26 0.26 0.27 0.24 0.00% 3.85% -11.11%

TSX:AVF-2.28 -0.18 0.01 -0.2 -92.11% -105.56% -2100.00%

TSX:BRE0.04 0.52 0.85 -0.34 1200.00% 63.46% -140.00%

TSX:MPC0.08 0.1 0.06 0.03 25.00% -40.00% -50.00%

TSX:CSF0.07 0.33 0.13 0.32 371.43% -60.61% 146.15%

TSX:PWC0.08 0.02 0.01 0.04 -75.00% -50.00% 300.00%

TSX:GCL0.12 0.3 0.53 0.1 150.00% 76.67% -81.13%

TSX:SRF0.11 0.23 0.11 -0.02 109.09% -52.17% -118.18%

TSX:CTY0.58 0.45 0.44 0.4 -22.41% -2.22% -9.09%

TSX:AHF0.01 0.01 0.02 0 0.00% 100.00% -100.00%

TSX:HPS.A0.36 0.04 0.01 0.04 -88.89% -75.00% 300.00%

TSX:MCB0.07 0.12 0.11 0.14 71.43% -8.33% 27.27%

TSX:GDL0.24 0.22 0.45 0.57 -8.33% 104.55% 26.67%

TSX:JOV0.1 0.11 0.1 0.1 10.00% -9.09% 0.00%

TSX:CXS0.56 0.68 0.65 0.62 21.43% -4.41% -4.62%

TSX:RYL-4.12 -0.07 0.06 -0.1 -98.30% -185.71% -266.67%

TSX:CXA.B0.04 0.01 0.01 0.03 -75.00% 0.00% 200.00%

TSX:GDS0.09 -0.02 -0.24 0.21 -122.22% 1100.00% -187.50%

TSX:AM0.15 0.25 0.28 0.2 66.67% 12.00% -28.57%

TSX:PIC.A-0.39 -0.04 0.1 -0.04 -89.74% -350.00% -140.00%

TSX:GDI0.18 0.02 0.1 0.02 -88.89% 400.00% -80.00%

TSX:TVK-0.19 0.14 0.08 0.12 -173.68% -42.86% 50.00%

TSX:LCS0.01 -0.02 0.14 -0.19 -300.00% -800.00% -235.71%

TSX:DOM.UN-0.04 -0.04 0.01 0.02 0.00% -125.00% 100.00%

TSX:WTE0.15 0.43 0.54 0.56 186.67% 25.58% 3.70%


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