Dividend policy, signaling, and discounts on closed-end funds

Shane A. Johnson, Ji-chai Lin, Kyojik Roy Song

Research output: Journal article publicationJournal articleAcademic researchpeer-review

22 Citations (Scopus)


We test the predictions of dividend signaling models using closed-end equity funds that adopt explicit policies committing them to pay minimum dividend yields. These policies represent deliberate attempts to reduce share price undervaluation relative to NAV. Funds that adopt minimum dividend policies experience reductions in their share price discounts, trade at smaller discounts than other funds, earn greater excess returns following policy adoption, and their managers survive longer than other managers do. The results are broadly consistent with the predictions of dividend signaling models, and suggest that high quality closed-end funds can reduce undervaluation via dividend policy.
Original languageEnglish
Pages (from-to)539-562
Number of pages24
JournalJournal of Financial Economics
Issue number3
Publication statusPublished - 1 Sep 2006
Externally publishedYes


  • Closed-funds
  • Compensation
  • Dividend policy
  • Signaling

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management


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