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1
Marisetty, Nagendra, and M. Suresh Babu. "Dividend Announcements and Market Trends." International Journal of Economics and Finance 13, no. 10 (September 15, 2021): 139. http://dx.doi.org/10.5539/ijef.v13n10p139.
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This research primarily aims to study the impact of dividend announcements on the stock price of companies listed in the Indian stock market. Incidental to the study, it is necessary to understand whether the market trends have any role in affecting the changes in share prices due to dividend announcements. The companies listed on the stock market are diverse in terms of the industry, market capitalization, and performance. We analyze the S&P BSE 500 index stocks, which declare cash dividend every year without fail for ten years from 2008 – 17. Total 1755 sample was tested for dividend announcement and sample divided into large, medium, and small sample sizes based on the market capitalization of the stocks to test the market trend effect. Event methodology market model used to calculate the abnormal returns on the dividend announcement day.
The present research study examined the impact of dividend announcements on stocks in the Indian stock market. The results observe in twenty-four times based on market capitalization wise and market trend-wise dividend announcements. The results of the study are not the same for all dividend announcement observations. The study found positive abnormal returns on event day in most of the dividend announcement observations and it is similar to Litzenberger and Ramaswamy (1982), Asquith and Mullins Jr (1983), Grinblatt, Masulis, and Titman (1984), Chen, Nieh, Da Chen, and Tang (2009) and many previous research results studied in major developed stock markets and emerging stock markets. Full sample, large-cap, and small-cap final dividend average abnormal returns are positively significant only in bull market trend (period 2) similar to Below and Johnson (1996) and other market trends final dividend announcement abnormal returns are positive in most of the observations, but returns are not significant. Average abnormal returns are sensitive to market trends, especially abnormal small-cap returns more vulnerable to market trends.
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Bowers, Helen M., and Donald Fehrs. "Dividend Buying: Linking Dividend Announcements and Ex-Dividend Day Effects." Journal of Accounting, Auditing & Finance 10, no. 3 (July 1995): 421–35. http://dx.doi.org/10.1177/0148558x9501000301.
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We provide a plausible explanation for earlier findings that positive abnormal stock returns associated with dividend announcements persist for several days and that abnormal volume and stock returns commence several days before a stock's ex-dividend day. This study links these two sets of findings to the short-term investment strategy of dividend buying by relating the abnormal returns and trading volume to individual stock characteristics favored by dividend buyers, namely the stock's return variance and dividend yield. We conclude that dividend buying is at least partially responsible for the abnormal returns and volume found between dividend announcement and ex-dividend days.
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Hariyanto, Ikka Tiaraintan, and Werner Ria Murhadi. "The Phenomenon of Dividend Announcement on Stock Abnormal Return (Case in ASEAN Countries)." Jurnal Manajemen Bisnis 12, no. 1 (January 12, 2021): 1–18. http://dx.doi.org/10.18196/mabis.v12i1.9001.
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Research aims: to examine the existence of stock’s abnormal return after dividend announcement activity.Design/methodology/approach: event study with 1.330 samples of dividend announcement in ASEAN countries during 2018. The research period was 21 days around the dividend announcement’s date.Research findings: this analysis's results agreed with the dividend signaling theory hypotheses, where the increase, decrease, or constant dividends could be an informative aspect for investors. Theoritical contribution/originality: it was shown by the presence of a positive abnormal return between an increase and a constant dividend, while a negative abnormal return between decrease dividends.Practitioner/policy implication: in the ASEAN capital market, it could be concluded that the change of dividend nominal would signal the firm’s prospect.Research limitation/implication: this research used the earliest dividend announcement before revision. Suggestions for further research are to pay attention to announcements of changes in dividend distribution dates and nominal revision, whether they contain information for investors, which will affect stock price movements.
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Chavali, Kavita, and Nusratunnisa . "Impact of Dividends on Share Price Performance of Companies in Indian Context." SDMIMD Journal of Management 4, no. 1 (March 1, 2013): 4. http://dx.doi.org/10.18311/sdmimd/2013/2681.
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The study aims at finding the impact of dividends (cash and stock) on share price performance of companies in the Indian context. A sample of 67 fast moving consumer goods companies who made dividend announcements from April 2007 to August 2011 are taken. In this study, the Market Model Event Study Methodology has been employed to measure the effect of dividend announcements and its impact on the share price with a 41-day event window is taken. The stock price data is collected for 20 days prior to the dividend announcement, the share price on the announcement date (<em>An date</em>) t<sub>0</sub> and 20 days post the dividend announcement. The findings indicate that the market is found to react positively to dividend announcements and with a significantly positive Average Abnormal Returns (AAR) around the announcement date.
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Puspitaningtyas, Zarah. "Empirical evidence of market reactions based on signaling theory in Indonesia stock exchange." Investment Management and Financial Innovations 16, no. 2 (April 19, 2019): 66–77. http://dx.doi.org/10.21511/imfi.16(2).2019.06.
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Signaling theory assumes that it is necessary to signal investors to how they perceive company’s prospects. One of them is dividend announcements. The announcement of dividends is predicted to be a signal for investors in the investment decision making process. This study aims to determine and analyze the effect of dividend announcements, both increases and decreases in dividends, on stock returns. This study is intended to find empirical evidence about market reactions based on signaling theory in Indonesia Stock Exchange on the period 2017. The analysis of this study uses the event study method and hypothesis testing carried out using different test paired sample t-test. The results of this study prove that the market reacts to the announcement of dividends. The market reaction is indicated by the value of abnormal returns, namely abnormal returns in the positive direction when the announcement of dividend increased and abnormal returns in the negative direction when the announcement of dividend decreased. The value of abnormal returns in a positive direction reflects the company’s performance in good condition, and vice versa. This result indicates that dividend announcements are a signal and contain information relevant to investors in the investment decision making process.
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Bandi, Bandi, Doddy Setiawan, Sri Suranta, and Lian Kee Phua. "An analysis of the significance of information content in dividend announcements: the case in Indonesia." Corporate Ownership and Control 11, no. 4 (2014): 469–74. http://dx.doi.org/10.22495/cocv11i4c5p5.
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This research aims at examining the significance of the information content in dividend announcements, using the Indonesian context. The sample of this research consists of dividend announcements during 2006 – 2012 periods. The result of this research shows that the market reacts positively to the dividend increase announcements. Investors perceive that a dividend increase is good news, thus they react positively. Indonesian investor react negatively to the dividend decrease announcement. A dividend decrease is bad news, thus they react negatively. On the other hand, investors do not react to the no-change dividend announcement. These results show that dividend announcements in Indonesia contain significant information for the investors.
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Riyani, Yani. "Pengaruh Pengumuman Kebijakan Dividen terhadap Volatilitas Harga Saham." Eksos 15, no. 2 (May 13, 2020): 85–94. http://dx.doi.org/10.31573/eksos.v15i2.85.
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This study aims to determine the effect of dividend policy announcements on stock price volatility. This research is an event study, with a period of observation 10 days before and after dividend announcement. According to the purposive sampling of 30 companies incorporated in the JII there are 20 companies that meet the criteria to be sampled. The variable used in this study is dividend policy announcements which are proxied by abnormal returns and stock price volatility. By using simple linear regression analysis, the results of the study found that the dividend announcement policy affects the volatility of stock prices. This means that dividend policy announcements contain information that causes shares to react. The results of this study are consistent with the dividend signaling theory which states that dividend policy announcements contain information that can cause stock prices to react.
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Lotfi, Taleb. "Dividend Policy in Tunisia: A Signalling Approach." International Journal of Economics and Finance 10, no. 4 (March 3, 2018): 84. http://dx.doi.org/10.5539/ijef.v10n4p84.
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The main objective of this study was to establish the stock price reaction to dividend announcements of firms quoted at the Tunisian Securities exchange (TSE). To do so, we develop a traditional event study. Two robust results emerge: First, when we observe the 196 announcements of dividends between years 1996-2004, the result is inconsistent with signaling theory, as long as, no abnormal return was observed on the announcement day (event period). Second, When the overall sample is divided into three sub-group (dividend increase, dividend-no-change and dividend), we observe a significant and abnormal return about -1.242 percent and -1.697 percent respectively on day D(t0-4) and D(t0+4) around the dividend announcement day (Dt0) only for the sub-group of firms that decreases their dividend. This result corroborates prior research in Tunisian context [Ben Naceur and al. (2006); Guizani and Kouki (2011)] that confirm, by using a different approach, the Lintner’s (1956) conclusions which states that Tunisian’ firms generally tend to avoid a dividend decrease (or cuts) and can constitute a supporting evidence of the dividend information content hypothesis in TSE.
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Marisetty, Nagendra, and Pardhasaradhi Madasu. "Signaling Hypothesis and Size Anomaly in Indian Stock Market." International Business Research 14, no. 9 (August 17, 2021): 94. http://dx.doi.org/10.5539/ibr.v14n9p94.
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The dividend signaling hypothesis means that dividend change announcements send signals to the market about its prospects. Market capitalization anomaly or size effect means small-cap stocks variances and returns are different than the large-cap stocks. The sample was tested for dividend change announcement, and the sample was divided into large, medium, and small sample sizes based on the market capitalization of the stocks to test the size effect. Event methodology market model used to calculate the abnormal returns on the dividend announcement day. We found that dividends send signals to the market, and the market reacts positively to the dividend change announcements on event day (Aharony and Swary 1980, Litzenberger and Ramaswamy 1982, Dhillon and Johnson 1994, Below and Johnson 1996), but results may vary with the size of the company. Small-cap companies' variances are higher than the large-cap and mid-cap companies, and also small-cap variances are not equal to other variances results similar to Wong (1989), Bandara and Samarakoon (2002), Sehgal and Tripathi (2006), and Switzer (2010). Finally, we concluded that the dividend signaling hypothesis and market capitalization or size effect anomaly exist in the Indian stock market
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Leftwich, Richard, and Mark E. Zmijewski. "Contemporaneous Announcements of Dividends and Earnings." Journal of Accounting, Auditing & Finance 9, no. 4 (October 1994): 725–62. http://dx.doi.org/10.1177/0148558x9400900406.
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The information content of dividends is well documented in the literature. The marginal information content of dividends in the presence of contemporaneous earnings announcements, however, is ambiguous empirically and theoretically. This paper documents that quarterly dividend announcements convey information beyond that contained in contemporaneous quarterly earnings announcements. Earnings provide information beyond that provided by dividends regardless of the type of information in the dividend announcement, but especially when dividends and earnings provide consistent information or when dividends provide no information. The marginal information content of dividends, however, appears to be a result from the subsample of observations for which earnings indicate “favorable” news about the firm and dividends contemporaneously indicate “unfavorable” news. Dividends convey little, if any, information that is not already conveyed in contemporaneous earnings for other subsamples of firms.
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Felimban, Razaz, Christos Floros, and Ann-Ngoc Nguyen. "The impact of dividend announcements on share price and trading volume." Journal of Economic Studies 45, no. 2 (May 14, 2018): 210–30. http://dx.doi.org/10.1108/jes-03-2017-0069.
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Purpose The purpose of this paper is to investigate the stock market response to dividend announcements in high growth emerging markets of Gulf countries. Design/methodology/approach The sample includes 1,092 dividend announcements from 299 listed firms over the period 2010-2015. Findings In the environment where there is an absence of capital gain and income tax, the authors find some evidence for the stock price reaction that partly supports the signaling hypothesis. The findings show that the Gulf Cooperation Council (GCC) market is inefficient because of the leakage information before the announcement in bad news, and the delay of share price adjustment in good news. In addition, the authors report significant trading volume (TV) reaction in all the three announcements clusters, where dividends increase, decrease, and are constant, lending support to the hypothesis that the dividend change announcements have an impact on the TV response due to different investors’ preferences. Originality/value This is the first empirical paper on market reaction in share price and TV around dividend announcement using data for the majority of GCC countries.
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Darmawan, Mr. "DIVIDEND OMISSION ANNOUNCEMENT EFFECT TO MARKET REACTION IN INDONESIA STOCK EXCHANGE." IJBE (Integrated Journal of Business and Economics) 2, no. 2 (June 4, 2018): 14. http://dx.doi.org/10.33019/ijbe.v2i2.72.
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This study examined the signalling theory about how the market / investors respond to dividend announcements made by companies listed on the Indonesia Stock Exchange during the period 2008-2012. This period was chosen because the economy and economic growth of Indonesia is relatively stable. In general, the objective of this research is to develop new theoretical approaches, in an effort to resolve the conceptual controversies regarding the impact of dividend policy on firm value. That in detail, in particular, objective: To analyze and empirically test the market reaction to the announcement dividend omissions, as well as Analyze and test empirically the firm-specific characteristics variables that affect the market reaction. The samples are all companies that announced dividend policy for 5 years as many as 242 companies with 729 event announcements. The results showed that in events dividend announcement found a significant reaction from the market. At the announcement of dividend omissions, there are 5 significant observations with 2 observations fit in theory. The study also shows none of the significant characteristics of the company is able to explain the market reaction to dividend announcements.
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Lang, Larry H. P., and Robert H. Litzenberger. "Dividend announcements." Journal of Financial Economics 24, no. 1 (September 1989): 181–91. http://dx.doi.org/10.1016/0304-405x(89)90077-9.
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Alaeto, Emeka Henry. "Impact of Dividend Announcements on Stock Prices of UK Firms Listed in London Stock Exchange." GIS Business 13, no. 4 (July 15, 2018): 1–10. http://dx.doi.org/10.26643/gis.v13i4.3271.
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The aim of this paper is to explore the possible relationship between dividend announcement and stock price reactions upon announcements by the quoted firms in London Stock Exchange (LSE). For the sake of this study, an event-study methodology was employed to calculate any abnormal or excess returns around dividend announcements for 100 firms listed in the LSE over a period of 5 years (2010-2014). The result of the event study indicates that dividend announcements do not convey information to investors (Khan, 2011). The researcher concludes by saying that dividend announcements do not convey any information to share prices, which is in consonance with the M-M Dividend Irrelevance Theory.
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Singh, Shailender, Pooja Jain, and Voon Chen Wei. "Stock Market Reactions to Dividend Announcements: Empirical Evidence From the Singapore Stock Market." International Journal of Accounting and Financial Reporting 8, no. 2 (May 27, 2018): 92. http://dx.doi.org/10.5296/ijafr.v8i2.12949.
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The present study investigates the 50 randomly selected companies from Singapore Stock Exchange to assess the impact of the dividend initiation announcement and omission announcement on the share prices of the companies under study. The study has analyzed the impact of dividend initiations announcement on the size of firms by dividing the firms into small and big categories. Further, the relationship between changes in dividend and company’s future earnings is also analyzed. The study finds that the dividend initiation announcement’s impact on the share prices of Singapore companies is trivial and uncertain.
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Nguyen Xuan, Truong, Huong Dao Mai, and Anh Nguyen Thi Van. "Stock price reaction to cash dividend announcements in Vietnam." Journal of Asian Business and Economic Studies 24, no. 02 (April 1, 2017): 74–89. http://dx.doi.org/10.24311/jabes/2017.24.2.01.
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This study attempts to investigate the stock price reaction to divi-dend announcements using data of Vietnamese listed firms on Hochiminh Stock Exchange (HOSE). Standard event study meth-odology has been employed on a sample of 198 cash dividend an-nouncements made in 2011. The results show that stock prices react significantly and positively to the announcements of cash dividends, including both dividend increasing and dividend decreasing events. It is also plausible that cumulative abnormal returns exhibit an in-creasing trend before announcement yet a decreasing trend after announcement dates. More specifically, we find positively signifi-cant cumulative abnormal returns of around 1.03% on announce-ment dates; other larger windows also demonstrate positive abnor-mal returns of around 1.3%. In addition, cash dividends have differ-ent effects on share prices of firms from different industries. These results support the signaling hypothesis and are also consistent with prior findings of empirical research done on more developed mar-kets, i.e. the US and the UK.
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Yu, Susana, and Gwendolyn Webb. "The information content of dividend initiation announcements." Managerial Finance 43, no. 7 (July 10, 2017): 794–811. http://dx.doi.org/10.1108/mf-10-2015-0287.
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Purpose The 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/approach On 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. Findings The 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/value The 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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Seyedimany, Arian. "Stock Price Reactions on NASDAQ Stock Exchange for Special Dividend Announcements." Emerging Science Journal 3, no. 6 (December 1, 2019): 382–88. http://dx.doi.org/10.28991/esj-2019-01200.
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Announcing dividend pay-out policy by a company will signals market firm’s future prospects and changes its stock prices according to dividend signalling theory. By analysis the effect of special dividend announcements for 5 companies listed in NASDAQ for the period of 2014-2018, this study investigates the stock price reactions to special dividend announcement for 40 days around the event and challenges dividend signalling theory. The empirical results calculated both in discrete and logarithmic forms. Only few disordered significant abnormal returns and average abnormal returns occurred according to the t-test. The results show that shareholders do not gain value from announcement of special dividend in NASDAQ stock exchange market. That Results indicated from adjusted market model in this research do not support dividend-signalling theory Hence do not confirm that the announcement of dividend has significant effect on price of shares. In general the results consistent with the Miller and Modigliani (1961) dividend irrelevance hypothesis.
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Eddy, Albert R., and Joel N. Morse. "Transaction Costs And The Information Content Of Dividend Cuts." Journal of Applied Business Research (JABR) 6, no. 2 (October 24, 2011): 32. http://dx.doi.org/10.19030/jabr.v6i2.6302.
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This paper models security price reaction to dividend cut announcements in the presence of informed traders and transaction costs. A transaction costs barrier prevents the attainment of a full information equilibrium price prior to the announcement of the cut. An empirical study of transaction costs and price reaction for both common stock and call options indicates that transaction costs may constitute a significant portion of security price reactions to cut announcements. Interestingly, the results of this interpretation allow for the simultaneous presence of dividend signaling and an informed subset of investors.
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Ozo, Friday Kennedy, and Thankom Gopinath Arun. "Stock market reaction to cash dividends: evidence from the Nigerian stock market." Managerial Finance 45, no. 3 (March 11, 2019): 366–80. http://dx.doi.org/10.1108/mf-09-2017-0351.
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PurposeVery little is known about the effect of dividend announcements on stock prices in Nigeria, despite the country’s unique institutional environment. The purpose of this paper is, therefore, to provide empirical evidence on this issue by investigating the stock price reaction to cash dividends by companies listed on the Nigerian Stock Exchange.Design/methodology/approachStandard event study methodology, using the market model, is employed to determine the abnormal returns surrounding the cash dividend announcement date. Abnormal returns are also calculated employing the market-adjusted return model as a robustness check and to test the sensitivity of the results toβestimation. The authors also examine the interaction between cash dividends and earnings by estimating a regression model where announcement abnormal returns are a function of both dividend changes and earnings changes relative to stock price.FindingsThe study find support for the signaling hypothesis: dividend increases are associated with positive stock price reaction, while dividend decreases are associated with negative stock price reaction. Companies that do not change their dividends experience insignificant positive abnormal returns. The results also suggest that both dividends and earnings are informative, but dividends contain information beyond that contained in earnings.Research limitations/implicationsThe sample for the study includes only cash dividend announcements occurring without other corporate events (such as interim dividends, stock splits, stock dividends, and mergers and acquisitions) during the event study period. The small firm-year observations may limit the validity of generalizations from these conclusions.Practical implicationsThe findings are useful to researchers, practitioners and investors interested in companies listed on the Nigerian stock market for their proper strategic decision making. In particular, the results can be used to encourage transparency and good governance practices in the Nigerian stock market.Originality/valueThis paper adds to the very limited research on the stock market reaction to cash dividend announcements in Nigeria; it is the first of its kind employing a unique cash dividends data.
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Taneem, Shania, and Ayse Yuce. "Information Content Of Dividend Announcements: An Investigation Of The Indian Stock Market." International Business & Economics Research Journal (IBER) 10, no. 5 (April 26, 2011): 49. http://dx.doi.org/10.19030/iber.v10i5.4230.
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According to the dividend information content hypothesis, dividend changes trigger stock returns because they reflect changes in managements assessment of a firms future profitability. This hypothesis has motivated a considerable amount of theoretical and empirical research. The general procedure used in prior research begins with classifying the dividend change announcement into either favorable or unfavorable. Dividend policy of companies operating in the emerging markets is very different from the widely accepted dividend policies operating in the developed countries. The purpose of this research is to examine the information content of dividend announcements and price movements in the emerging Indian stock market. The paper investigates the information content and market reaction to dividend announcements using data from the developing Indian market. We focus on the information content of dividend policies through the share price reaction of 82 companies in India that are listed in the Bombay Stock exchange.
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Anjali, Rane, and Guntur Anjana Raju. "Dividend Announcement and Market Efficiency- An Empirical Study on Service Sector Companies Listed in BSE." SDMIMD Journal of Management 8, no. 1 (April 17, 2017): 1. http://dx.doi.org/10.18311/sdmimd/2017/15714.
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Dividend Policy is a crucial decision area in the field of corporate finance and informational efficiency of the market has always been an area of vital interest for financial economists. The literature review documented that in imperfect capital markets with information asymmetries, the dividend announcement affects shareholder wealth. However, very few attempts have been made so far to know dividend behavior of Service sector firms in India. The present study is a little research effort in this direction. This study analyses if the announcements of dividend of stocks listed in Bombay Stock Exchange conveys any information. Fulfilling the study, we calculated the average abnormal return by applying the event study methodology. Daily stock data of 193 firms with market model adjustments on 2436 dividend announcements were used for the period 2000 to 2016 to analyze market efficiency. This study reports stock price reactions of banking, health care, IT and realty sector surrounding 21 days event window of the dividend announcement. The results found mixed results with majority of the firms having presence of informational efficiency in Indian service sector. In Realty sectors stock price reaction to dividend announcement is not statistically significant whereas for other three sectors, Banking, IT and Healthcare, it is significant.
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Marisetty, Nagendra, and M. Suresh Babu. "Stocks Abnormal Returns and Rate of Dividend Announcements." International Journal of Business and Management 16, no. 11 (September 21, 2021): 33. http://dx.doi.org/10.5539/ijbm.v16n11p33.
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The present research study examined the impact of different dividend rate announcements on stocks prices in the Indian stock market. Stocks selected from S&P BSE 500 index and study period from 2008 – 2017. The sample used for this study is 1755 pure cash dividend announcements (492 large-caps, 425 mid-caps, and 838 small-caps). Dividend rates are classified into six classifications to test the stocks' abnormal returns to different dividend classifications. Event methodology market model used to calculate Average Abnormal Returns (AAR) and Cumulative Average Abnormal Returns (CAAR). The results were observed twenty-one times based on market capitalization and dividend rate wise for a final dividend announcement. The results of the study are not the same for different dividend rate classifications and different market capitalizations. The study found positive abnormal returns on event day in most of the classifications, and it is similar to Litzenberger and Ramaswamy (1982), Asquith and Mullins Jr (1983), Grinblatt, Masulis and Titman (1984), Chen, Nieh, Da Chen, and Tang (2009) and many previous research results studied in major developed stock markets and emerging stock markets. Full sample and small-cap final dividend rate 100 percent to 199 percent average abnormal returns are positively significant, and other final dividend rate classification abnormal returns are positive in most of the observations, but returns are not significant. Large-cap average abnormal returns are more sensitive to different dividend rates, and small-cap reacts positively in all classifications. So, different market capitalization final dividend actions impact on stocks in India varies in different dividend rate classifications.
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Evan, Nur, and Aftoni Sutanto. "PENGARUH PENGUMUMAN PERUBAHAN DIVIDEN TERHADAP ABNORMAL RETURN SAHAM DI BURSA EFEK INDONESIA." Jurnal Fokus Manajemen Bisnis 2, no. 2 (September 30, 2012): 61. http://dx.doi.org/10.12928/fokus.v2i2.1319.
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The information about increase and decrease of the cash dividend that it's be dividend by the company is one of information that be considered important enough for investor, because in the information include. The loading information that due to advantage prospect that will get by the company in the next time. It's caused a condition where the investors is met to the high uncertainty of the result of it's investment activity so it's increase and decrease information a cash dividend can be assumed as an indicator for repairing the advantage prospect company in the next time. This research examines information content of cash dividends announcements increase and decrease and the difference of average abnormal return between companies announcing of cash dividend. The result shows that those companies announcing the increase of cash dividends, the is reactive, especially in the t+6 after dividends announcement. It indicate that there is content information on the announcement of cash dividends increase. Mean while those companies announcing the decrease of cash dividends, the market is reactive, especially in the t+9 after announcement of cash dividends. The test of the difference of average abnormal return before and after on the announcement of the increase and the decrease of cash dividends, show that there is no difference between average abnormal return before and after announcement of increase and decrease cash dividends.
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Chatterjee, Chanchal, and Paromita Dutta. "Price Behaviour Around Dividend Announcements in the Indian Equity Market in the Existence of Corporate Dividend Tax." Global Business Review 18, no. 2 (March 16, 2017): 402–15. http://dx.doi.org/10.1177/0972150916668609.
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This article empirically examines the price behaviour around cash dividend announcements of the firms listed on the National Stock Exchange of India Ltd (NSE) in order to understand whether dividend announcements really influence stock returns in the market and carry meaningful information to the investors in the existence of corporate dividend tax. The article uses standard ‘event study’ methodology based on market model on a sample of 210 dividend announcements. Subsample analysis is employed for further analysis of firms of different categories. The study finds that cash dividend announcements do not necessarily generate abnormal stock returns in an emerging market, such as India. The whole sample is further divided into various subsamples on the basis of firm size and the size of payout ratio. The study finds that large payout firms experience greater stock returns compared to the smaller payout firms just after the dividend announcements. However, stock returns following dividend announcements do not vary across firm size. This article provides evidence to the managers about the non-linkage between cash dividend announcements and stock returns in an emerging market like India. This finding is contrary to the findings of many other studies that are based on the data of the developed economies.
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Draganac, Dragana. "Do dividend shocks affect excess returns? An experimental study." Ekonomski anali 62, no. 214 (2017): 45–86. http://dx.doi.org/10.2298/eka1714045d.
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The dividend announcement of a company is an informational event that can cause underreaction, momentum, overreaction, post-dividend announcement drift, and mean reversion. It is the uncertainty surrounding dividend announcements that leads to such behavioural phenomena. Most authors consider that underreaction occurs after dividend shocks because new information about the dividend is being slowly and gradually built into the stock price. The effect of dividend shocks is often reflected in excess returns, which can last up to one year after the shock. The experiment described in this paper tests whether statistically significant excess returns are realized after a shock dividend announcement. Participants trade with the stocks of two companies, which only differ by dividend-generating stochastic process. The dividend process of Company 2 is a Merton-style jump-diffusion process (consisting of two parts: Brownian motion and Poisson jump), while the dividend process of Company 1 contains only the Brownian motion component. Statistically significant excess returns are expected when trading with Company 2 stocks. An autoregressive model is applied in order to test this hypothesis. The conclusion is that a dividend shock is followed by statistically significant excess returns in 20 of the 22 experiments, which implies that markets are inefficient after sudden and large changes in dividends. Underreaction and discount rate effects are identified.
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Kreidl, Felix, and Hendrik Scholz. "Exploiting the dividend month premium: evidence from Germany." Journal of Asset Management 22, no. 4 (April 27, 2021): 253–66. http://dx.doi.org/10.1057/s41260-021-00215-3.
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AbstractDividend payments are firm events on a recurring and predictable basis. High returns in the period between announcement-date and ex-dividend date are the main driver for the so-called dividend month premium, which are positive abnormal returns in months in which corporations are predicted to issue dividend payments. In our empirical analysis of the German stock market, we find a robust dividend month premium, which is particularly high for stocks with positive dividend surprise. Knowing the dates of dividend announcements and payments enable portfolio managers to exploit the dividend month premium. Also taking into account tracking error and transaction costs, we show that simple portfolio-enhancing strategies lead to highly significant abnormal returns.
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Al-Shattarat, Wasim K., Muhannad A. Atmeh, and Basiem K. Al-Shattarat. "Dividend Signalling Hypothesis In Emerging Markets: More Empirical Evidence." Journal of Applied Business Research (JABR) 29, no. 2 (February 13, 2013): 461. http://dx.doi.org/10.19030/jabr.v29i2.7650.
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The main objective of this study is to examine empirically the signalling theory for a sample of firms listed at Amman Stock Exchange (ASE) during the period 2005 to 2010. The sample consists of 183 observations and 132 observations for dividend release sample and no-dividend release sample, respectively. Event Study Methodology (ESM) is applied to examine the market reaction to dividend release announcements. The market model is used to generate the expected returns. Also, the t-test is used to examine the significance of the mean and cumulative abnormal returns. Results from the dividend release sample shows that there is a significant positive abnormal return on the announcement days. Also, it shows that there is an overreaction straight after the announcement day, then a correcting attempt in the post event and then it goes back to normal, which is consistent with the signalling hypothesis. For the no-dividend release sample, the results show no significant abnormal return on and around the announcement days which is again consistent with the signalling hypothesis. Our results are consistent with Al-Shattarat et al. (2012) suggestions that there could be value relevance for dividends rather than dividends change. Our findings show that there is value relevance for dividends and thus supporting the signalling hypothesis.
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Wibowo, Wisnu Prasetyo, and Tina Sulistiyani. "PENGARUH PENGUMUMAN DEVIDEN TUNAI DITINJAU DARI KENAIKAN DAN PENURUNAN DEVIDEN TERHADAP HARGA SAHAM DI BURSA EEFEK INDONESIA." Jurnal Fokus Manajemen Bisnis 3, no. 2 (September 30, 2013): 87. http://dx.doi.org/10.12928/fokus.v3i2.1334.
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The purpose of this study is to prove whether there is an influence of increasing and decreasing dividend announcements towards stock prices fell in the days before the announcement of cash dividends with the days after the announcement of cash dividend. This research was conducted on banking companies listed in Bursa Efek Indonesia (BEI) with using purposive sampling technique. The researcher takes 7 companies to be the sampe, that are 2 companies in increasing dividends namely Bank Bumi Artha Tbk, and Bank CIMB Niaga Tbk, and 5 companies for decreasing dividends namely the Bukopin Tbk, Bank Dananmon Indonesia Tbk, Bank Himpunan Saudara 1906 Tbk, Bank Internasional Indonesia Tbk, Bank Rakyat Indonesia Tbk, then testing the hypothesis using a paired t test (Paired Two Sample). Companies that increase the vaue of dividends that the Bank Bumi Artha Tbk and Bank CIMB Niaga Tbk, thereis a significance between the stock price in the days before the announcement of cash dividends with the days after the announcement of cash dividends, while companies that reduced the value of dividends, there are two different result test, the first on Bukopin Tbk, Bank Danamon Indonesia Tbk, Bank Himpunan Saudara 1906 Tbk there is a significant differences between the stock price in the days before the announcement of cash dividends with the days after the announcement that the second cash dividends of Bank Internasional Indonesia Tbk, and Bank Rakyat Indonesia Tbk, there is no significant difference between the stock price in the day before the announcement of cash dividens with the dats after the announcement of cash dividends.
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Chen, Sheng-Syan, and Kuei-Chin Fu. "An Examination of the Free Cash Flow and Information/Signaling Hypotheses Using Unexpected Dividend Changes Inferred from Option and Stock Prices: The Case of Regular Dividend Increases." Review of Pacific Basin Financial Markets and Policies 14, no. 03 (September 2011): 563–600. http://dx.doi.org/10.1142/s0219091511002329.
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This paper measures unexpected dividend changes in testing the free cash flow and information/signaling hypotheses using the Bar–Yosef/Sarig method. The empirical findings reveal the following: (i) The association between announcement period abnormal returns and the cash level is significantly positive for low q firms; (ii) The positive association between announcement period, abnormal returns, and the cash level is stronger in low q than in high q firms for most regressions; (iii) Low q firms reduce their capital and research and development (R&D) expenditures during the four fiscal years following dividend increase announcements. Our results are consistent with the free cash flow hypothesis.
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Dong, Jing, Hui Li, Kerry Liu, and Xiaohui Wu. "The stock market reaction to dividend reductions and omissions in China." Managerial Finance 45, no. 3 (March 11, 2019): 381–98. http://dx.doi.org/10.1108/mf-03-2018-0134.
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Purpose The purpose of this paper is to investigate Chinese stock market reaction to the announcements of dividend reductions and omissions. Design/methodology/approach The data sets cover the period from 1990 to 2009. A rolling portfolio approach is performed and the Fama–French three-factor model is used to calculate the post-announcement long-term abnormal returns. The matching method and the sub-sample tests are used to examine the robustness. Findings After controlling for firm size, the unexpected earnings and government ownership, no evidence of the dividend announcement drift is found. The results also show that the government ownership and the large trading play a role in explaining the post-announcement abnormal returns. Originality/value This is the first study concerning the Chinese market that examines the Chinese stock market reaction to dividend cut and omission using a long-time period of data.
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Maringa, Elijah Kihooto, Dr Riro G.K, and Dr David Kiarie. "MARKET REACTION TO DIVIDEND ANNOUNCEMENTS: ANALYSIS AT NAIROBI SECURITIES EXCHANGE." International Journal of Finance and Accounting 3, no. 1 (August 31, 2018): 48. http://dx.doi.org/10.47604/ijfa.702.
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Purpose: The study sought to check the efficiency of Nairobi Securities Exchange with regard to dividend announcements on semi-strong form of efficiency.
Methodology: The study employed event study methodology which is descriptive in nature. Census was carried out to determine which dividend announcements qualified for analysis. The period of study extended for five years from 2012 to 2016. Window period covered 30 days before and 30 days after the announcement. Average abnormal returns were evaluated for significance at 95% confidence level.
Findings: The results indicated that the market was efficient for 4 years except one year where the market was found to be inefficient in semi strong form perhaps due to the prevailing economic conditions during the year.
Unique contribution to theory, practice and policy: This study recommended that the NSE be checked for efficiency from time to time. This is informed by the fact that an efficient market allocates the resources optimally from areas they are less required to sectors they are highly required hence contributing to economic development. The study recommends regulatory bodies to come up with strategies to enhance and sustain efficiency at NSE.
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Blau, Benjamin M., Kathleen P. Fuller, and Robert A. Van Ness. "Short selling around dividend announcements and ex-dividend days." Journal of Corporate Finance 17, no. 3 (June 2011): 628–39. http://dx.doi.org/10.1016/j.jcorpfin.2010.11.001.
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Altiok-Yilmaz, Ayse, and Elif Akben Selcuk. "Information Content of Dividends: Evidence from Istanbul." International Business Research 3, no. 3 (June 11, 2010): 126. http://dx.doi.org/10.5539/ibr.v3n3p126.
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This study investigates the market reaction to dividend change announcements at the Istanbul Stock Exchange. A sample of 184 announcements made by 46 companies during the period 2005 to 2008 is analyzed by using the event study methodology. The results suggest that the market reacts positively to dividend increases, negatively to dividend decreases and does not react when dividends are not changed, consistent with the signaling hypothesis. Also, the results show pre-event information leakage for the decreasing dividends sample.
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Agbetonyo, Yaovi S�lom, Emmanuelle Fromont, and Jean-Laurent Viviani. "Asymmetric Responses to Dividend Announcements." Revue de l'OFCE N�160, no. 6 (2018): 77. http://dx.doi.org/10.3917/reof.160.0077.
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Kato, Kiyoshi, Uri Loewenstein, and Wenyuh Tsay. "Voluntary dividend announcements in Japan." Pacific-Basin Finance Journal 5, no. 2 (June 1997): 167–93. http://dx.doi.org/10.1016/s0927-538x(97)00010-3.
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Eddy, Albert, and Bruce Seifert. "FIRM SIZE AND DIVIDEND ANNOUNCEMENTS." Journal of Financial Research 11, no. 4 (December 1988): 295–302. http://dx.doi.org/10.1111/j.1475-6803.1988.tb00090.x.
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Eades, Kenneth M., Patrick J. Hess, and E. Han Kim. "Market rationality and dividend announcements." Journal of Financial Economics 14, no. 4 (December 1985): 581–604. http://dx.doi.org/10.1016/0304-405x(85)90027-3.
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Amihud, Yakov, and Kefei Li. "The Declining Information Content of Dividend Announcements and the Effects of Institutional Holdings." Journal of Financial and Quantitative Analysis 41, no. 3 (September 2006): 637–60. http://dx.doi.org/10.1017/s0022109000002568.
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AbstractWe propose an explanation for the “disappearing dividend” phenomenon: a decline in the information content of dividend announcements, which reduces the propensity of firms to use dividends as a costly signal. A reason for a decline in the information content of dividends is the rise in holdings by institutional investors that are more sophisticated and informed. Indeed, we find a decline in CAR at dividend change announcements since the mid–1970s. Across firms, CAR is a decreasing function of institutional holdings. Institutional investors exploit their superior information and buy before dividend increases. In addition, dividends are less likely to rise in firms with high institutional holdings.
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Akbar, Muhammad, and Humayun Habib Baig. "Reaction of Stock Prices to Dividend Announcements and Market Efficiency in Pakistan." LAHORE JOURNAL OF ECONOMICS 15, no. 1 (January 1, 2010): 103–25. http://dx.doi.org/10.35536/lje.2010.v15.i1.a5.
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This study tests the semi-strong form of market efficiency by investigating the reaction of stock prices to dividend announcements. It analyzes cash, stock, and simultaneous cash and stock dividend announcements of 79 companies listed on the Karachi Stock Exchange from July 2004 to June 2007. Abnormal returns from the market model are evaluated for statistical significance using the t-test and Wilcoxon Signed Rank Test. The findings suggest negligible abnormal returns for cash dividend announcements. However, the average abnormal and cumulative average abnormal returns for stock and simultaneous cash and stock dividend announcements are mostly positive and statistically significant.
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Aisah, Siti Nur, and Tina Sulistiyani. "REAKSI PASAR TERHADAP PENGUMUMAN KENAIKAN DAN PENURUNAN DIVIDEN PADA INDUSTRI PERBANKAN YANG TERDAFTAR DI BURSA EFEK INDONESIA PERIODE 2008-2010." Jurnal Fokus Manajemen Bisnis 2, no. 2 (September 30, 2012): 70. http://dx.doi.org/10.12928/fokus.v2i2.1320.
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This study aims to determine how the market reaction to announcements of dividend increases and decreases in the Banking Companies listed on the Indonesia Stock Exchange 2008-2010 period. This study population was 31 banking companies that announced dividend increases and decreases during the period 2008-2010. Data collection technique used was purposive sampling. Of the 31 existing populations, selected 7 samples that meet the criteria penelitian. Teknik analysis of the data used is the one sample t-test. The research proves that in 2009 the abnormal return only occurs on day 5 before the announcement of devidend increase, while the other day, thus indicating no abnormal return. Research in 2010, it is known that there is no abnormal return on announcement of an increase or descrease in dividends.
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Brown, Lawrence D., Dosoung P. Choi, and Kwon-Jung Kim. "The Impact of Announcement Timing on the Informativeness of Earnings and Dividends." Journal of Accounting, Auditing & Finance 9, no. 4 (October 1994): 653–74. http://dx.doi.org/10.1177/0148558x9400900402.
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We relate the informativeness of earnings and dividend announcements to their timing relative to the fiscal quarter end to which the earnings pertain. Evidence is provided that the information content of earnings decreases as the timing of its announcement relative to the fiscal quarter end increases, and that such information erosion is more pronounced for smaller firms. Evidence is also provided that the information content of dividend announcements increases as its timing relative to the fiscal quarter end increases, and that such information enhancement is relatively more pronounced for larger firms. The results suggest that preannouncement information precision and announced information precision have offsetting effects on the informativeness of financial information, and that the nature of the offset depends on the type of information and firm size. More specifically, the predisclosure information effect is more pronounced for earnings and small firms, whereas the announced (new) information effect is more pronounced for dividends and large firms.
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Anwar, Sadaf, Shveta Singh, and P. K. Jain. "Impact of Cash Dividend Announcements: Evidence from the Indian Manufacturing Companies." Journal of Emerging Market Finance 16, no. 1 (March 7, 2017): 29–60. http://dx.doi.org/10.1177/0972652716686238.
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According to a recent survey by McKinsey and Company, the Indian manufacturing sector is expected to touch US$ 1 trillion by 2025.This study analyses the impact of the announcement of cash dividends on the stock price returns of the manufacturing companies listed on Bombay Stock Exchange using event study methodology. Further, it explores whether the US financial crisis recession impacted average abnormal returns (AARs) in the period of study. The empirical results show that cash dividend announcements have positive AARs. Overall, the results lend support to the signalling and informational content hypotheses of dividends. The paired samples t-test indicates a significant difference in the mean values of AARs in the pre-and post-recession phases, highlighting the impact of recession.
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Liu, Jau-Yang, and Der-Jang Chi. "Stock Market Reaction to Various Dividend Announcements: Which Kind of Dividend Announcement is More Significant?" Journal of Testing and Evaluation 42, no. 4 (May 23, 2014): 20120327. http://dx.doi.org/10.1520/jte20120327.
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Carroll, Thomas J. "The Information Content of Quarterly Dividend Changes." Journal of Accounting, Auditing & Finance 10, no. 2 (April 1995): 293–317. http://dx.doi.org/10.1177/0148558x9501000207.
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This paper shows that dividend changes reveal new information about future earnings levels and are mixed with regard to future earnings variance. Revisions of Value Line earnings forecasts spanning up to five quarters have a positive association with unexpected dividend changes. Consistent with the negative association documented between dividend changes and future earnings variance, these revisions also exhibit greater cross-sectional dispersion following dividend decreases than following dividend increases. The relation between stock returns and earnings forecast errors following dividend announcements shows that dividend announcements convey information to the market about earnings in the next quarter and the quarter one year hence, but are not consistent with dividends revealing new information about the variance of future earnings.
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Al-Shattarat, Wasim K., Jamal A. Al-Khasawneh, and Husni K. Al-Shattarat. "Market Reaction To Changes In Dividend Payments Policy In Jordan." Journal of Applied Business Research (JABR) 28, no. 6 (October 25, 2012): 1193. http://dx.doi.org/10.19030/jabr.v28i6.7335.
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The purpose of this paper is to examine empirically the signalling theory for a sample of firms listed at Amman Stock Exchange (ASE) during the period 2001 to 2006. The sample consists of 215 observations. The Event Study Methodology (ESM) is employed to examine the market reaction to dividend change announcements. The nave model is used to classify the sample under four sub samples; Dividend Increase, Dividend Decrease, Dividend No Change and No Dividend No Change. The market model, mean adjusted model, market adjusted model, market model adjusted with Scholes and Williams and market model adjusted with Fowler and Rorke models are used to generate the expected returns. Also, the t-test, ZD test and Corrados non-parametric test are used to examine the significance of the mean and cumulative abnormal returns. Overall, the results show that the market reacts positively to dividend increase, dividend decrease and dividend no change announcements. In addition, the results indicate that there is no significant market reaction to dividend no change sample with zero distributions. This result indicated that there is little value-relevance to dividend change announcements. The interpretation of the positive market reaction is related to dividend release announcements rather than dividend changes. Therefore, there is some support to the signalling hypothesis to dividend release. Furthermore, applying thin trading models and non-parametric tests leads to the same conclusion.
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Stephens, Alan A., and Dennis Proffitt. "The Market Response To Unexpected Dividend Announcements." Journal of Applied Business Research (JABR) 4, no. 4 (October 26, 2011): 57. http://dx.doi.org/10.19030/jabr.v4i4.6393.
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Research concerning the informational content of dividends continues to provide inconsistent results. This paper argues that this lack of consistency is the result of the definition of dividend expectations used in past studies. This study examines a broad cross-section of dividend policies and incorporates into the definition of dividend policy the full range of past sequence and timing of dividend changes.
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Marisetty, Nagendra, and Pardhasaradhi Madasu. "Corporate Announcements and Market Efficiency: A Case on Indian Capital Market." International Journal of Business and Management 16, no. 8 (July 12, 2021): 71. http://dx.doi.org/10.5539/ijbm.v16n8p71.
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Capital markets being the backbone of the economy, are expected to be functioning efficiently. Efficiently-priced financial markets are considered a catalyst for the economic growth of the nations (Malkiel, 2010). Efficient markets are the reflection of security valuations. In an informationally efficient market, no one can beat the market and make abnormal returns based on the information because the information is instantaneously observed in the stock prices. The current paper analyses the market efficiency of three of the most popular corporate events, i.e., announcement of cash dividends, bonus issues, and stock split in the Indian context. The sample is 2253 pure cash dividend announcements (627 large-caps, 552 mid-caps, and 1074 small-caps), 152 bonus issue announcements (49 large-caps, 33 mid-caps, and 70 small-caps), and 181 stock split announcements (35 large-caps, 34 mid-caps, and 112 small-caps) were used for this study. Event methodology market model used to calculate Average Abnormal Returns (AAR) and Cumulative Average Abnormal Returns (CAAR).
The results of the study have few findings which are contradictory to the existing literature on market efficiency. The cash dividend announcements have shown evidence for market efficiency, and results are contrary to Gupta et al. (2012), but the results are similar to Mishra (2005). Bonus issue announcements also have shown evidence for a semi-strong form of efficiency, test results identical to Dhar and Chhaochharia (2008), Kumar and Mittal (2015). Stock split announcements have not shown market efficiency, and the effect is similar to the study of Lakshmi and Roy (2012) and contrary to Chavali and Zahid (2011). Our results also support the premise that the emerging countries depict evidence of market efficiency (Bechev, 2003). Finally, we conclude that market efficiency results differ based on corporate announcements and market capitalization.
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Mehta, Chhavi, P. K. Jain, and Surendra S. Yadav. "Market Reaction to Stock Dividends: Evidence from India." Vikalpa: The Journal for Decision Makers 39, no. 4 (October 2014): 55–74. http://dx.doi.org/10.1177/0256090920140405.
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Theoretically, stock dividends have no impact on financial position of the announcing company as net worth and total assets remain the same, though empirical evidence across the globe shows that markets react to stock dividend announcements. The present study analyses the market reaction pertaining to stock dividend decisions in the Indian context. Market reaction has been captured in terms of impact on returns, liquidity, and risk. The sample includes 51 ‘pure’ stock dividend announcements from January 1, 2002 to June 30, 2010. The study finds that the announcement of stock dividends induces an increase in the wealth of the shareholders in India. A consistent pattern of positive average abnormal returns during the pre-announcement window till the announcement day and a pattern of negative average abnormal returns during the post-announcement window have been observed. On cumulating these results, the shareholders of the companies that issued stock dividends gain significant returns. The justification for such results seems to be that the information about the stock dividends announcement reaches the investors prior to the decision date as it is manda-tory for the issuing company to inform the exchange (where it is listed) about the date of the board meeting. It has been observed that the companies usually inform the exchange seven days prior to the day of the board meeting. In most of the cases, the companies provide the agenda item information along with the board meeting date to the exchange. In such a situation, the moment this information about the agenda item is given to the exchange, this becomes public information and investors start reacting to it. The cumulative average abnormal return values over various size event windows depict that an investor can earn substantial returns if he purchases the shares on the day the news of board meeting (to announce stock dividends) comes to the market and sells them one day after the announcement day. The investor can also gain if the shares are purchased one day prior to the announcement day and are sold one day after the announcement day. The trading quantity reduces significantly immediately after these decisions are announced. On a short-term basis, the investors seem to perceive that the announcement of stock dividends provides signals about the firm's bright future prospects. This leads to a decline in trading quantity as investors, who own the shares at the time of announcement, prefer to hold the shares expecting an increase in their wealth in future. In the long-run, a marginally positive impact has been observed. The announcement of stock dividends reduces variability of returns in the short-run as well as in the long run, lending price stability to the stocks of the announcing companies.
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Carroll, Carolyn, and R. Stephen Sears. "Dividend Announcements and Changes in Beta." Financial Review 29, no. 3 (August 1994): 371–93. http://dx.doi.org/10.1111/j.1540-6288.1994.tb00402.x.
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