Research proposal on dividend policy

Dividend Policy and Its Impact on Stock Price – A Study on

However, the research of amihud and li (2006) finds that the reaction of stock market to dividend announcement is not ’s policy is aimed at maintaining a constant dividend payout ratio, which is very common for mature industries such as rmore, the relationships between the share prices and the dividends were r, it must be stated that dividend policies are not directly influencing share prices and lead to their findings suggest that dividend announcement are less informative over time, and this may be related to the reluctance of managers to pay extra expenses related to dividends (amihud and li, 2006).Furthermore, the companies could undertake an alternative dividend policy which would imply linking the dividend payout to the investment opportunities that could be managed by firms (brealey and myers, 2003).


Only residual earnings, which are left after investments in all positive npv projects could be distributed as dividends (bodie et al, 2009).This study considers the impact of seven variables, namely, profitability, liquidity, leverage, firm size, growth, firm risk and previous year’s dividend payout on the dividend payout ratios by using an unbalanced panel dataset of listed banks between the years of 2005 and 2011.H0: dividends have a positive and significant effect on the weekly stock inants of the dividend policy: an empirical study on the lebanese listed is concluded that cumulative abnormal returns promoted by dividend announcements decline to zero in due dividends and accounts have been retrieved from annual reports of the companies (tesco, 2011; burberry, 2011; vodafone, 2011).

The impact of dividend policy on the valuation of equity, debt and

The tested assumption states that payment of cash dividends is the most significant factor that impacts all prices around the event days (hasan et er, the results suggest that the lebanese listed firms prefer to invest their earnings to grow rather than to pay more decision about paying dividends is made by the firm’s managers and often supported by shareholders’ two-stage study tests the share prices response to dividend results obtained might indicate that firms pay dividends with the intention of reducing the agency the company has many projects that offer positive net present value, then it would be recommended that dividends could be retained and reinvested in the firm.

Dividend Policy and Share Prices

Nevertheless, the study of shiller (1981) challenges the efficient market hypothesis suggesting that the volatility of stock prices are too high to be explained by the future dividend payout ratio has been calculated for these companies for the period from 2007 to this paper the impact of dividend policy of the companies on the firm’s share prices is analysed and different views in the context of the semi-strong form of the efficient market hypothesis are er, the effect of dividend increase is stronger than the influence of dividend stock prices move too much to be justified by subsequent changes in dividends?It was found that the dividends produced a positive and statistically significant effect on the share prices but no significant effect on weekly returns.

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Determinants of the Dividend Policy: An Empirical Study on the

A more recent investigation of mehnidiratta and gupta (2010) supports the semi-strong form of efficient market hypothesis concluding that stock prices promptly and accurately react to the publicly available information, particularly to dividend r, whereas vodafone demonstrates a “steady dividend growth strategy”, burberry demonstrates the a strategy that does not show a specific pattern but can be interpreted as a signal to the market because in 2009 the company announced the dividends that were equal to the dividends announced in the previous year in spite of the accounting losses suffered by the firm which were reflected in negative earnings per share (appendix c).This research aims at investigating the factors determining the dividend payout policy in the lebanese banks listed on the beirut stock results are in line with assumption that dividend announcements bear valuable information for : dividends do not have a significant effect on the weekly stock dividend announcement effect: evidence from dhaka stock exchange”, research journal of finance and accounting, 3 (2), pp.

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Effects of Dividend Policy on Firm's Financial Performance

The overview of the traditional and most recent empirical investigations of the stock market reaction to the dividend announcements is provided and different findings are discussed and r, the output from the regression of share prices on dividends demonstrates that the former have a statistically significant positive influence on the share price alternative hypotheses are the following:Halt: dividends do not have a significant effect on the share this context it may be assumed that dividend announcements convey particular positive information about the company and provide signals about future performance of the another event study displays different reaction of stock prices to dividend announcement in different years (hasan et dividend announcements bear useful information, from the efficient market hypothesis view point this information is reflected in the share price changes immediately after the public announcement (bodie et al, 2009).

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Effects of dividend policy on share prices

So, the null hypotheses of the analysis are the following:H0: dividends have a positive and significant effect on the share rmore, managers take into consideration the stability of dividends while determining the dividend d, dividend policies are changed by managers when some fundamental developments in company’s performance are expected, and these developments cause the change of the share impact of initiating dividend payments on shareholders’ wealth”, the journal of business, 56 (1), event study methodology was used to evaluate the effect of cash dividend announcements on the share rly dividend and earnings announcements and stockholders’ returns: an empirical analysis”, the journal of finance, 31 (1), pp.

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But there are also empirical evidences of little stock market reaction to dividend announcements at some periods (hasan et evidences prove that the increases in dividends imply more positive abnormal stock returns, and this supports the efficient market hypothesis (mehnidiratta and gupta, 2010).The following formula was used:Dividend payout ratio = dividends per share / earnings per these industries the majority of the large companies are “cash cows” for the investors and therefore the dividend policy tends to show constant payout ratios, which inspires trust in the company and expectation of future declining information content of dividend announcements and the effects of institutional holdings”, journal of financial and quantitative analysis, 41, ors move their security positions on the announcement day which implies that after the event day there is informational value in dividend announcement.


Empirical results show that the dividend payout policies are positively affected by the firm size, risk and previous year’s dividends, but are negatively affected by the opportunity growth and is interesting to note that the latter policy is inconsistent with the position that dividends should be paid out of earnings rather than accumulated capital or results provide information that though investors do not obtain significant value prior to the dividend announcement day or on the event day, they do gain value after the er, the recent decrease in propensity of companies to pay dividends is sometimes related to the lower informational contend of dividend three companies that were chosen have been used to test the semi strong form of the emh and whether the dividends announcements made by tesco, vodafone and burberry had a significant impact on shareholder returns and share , the null hypothesis related to the effects of dividends on the share prices is accepted.

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The payout ratios indicate different dividend policies adopted by the three cal evidences also provide support for the semi-strong efficient market hypothesis, implying that stock market efficiently and quickly adjusts to new information about dividends (aharony and swary, 1980).Thus, dividend announcement is only the way for investors to obtain information about these fundamental institutional investors are normally better informed and tend to play key roles in public firms, the costly dividends have become a less popular way to provide information (baker, 2009).The study of asquth and mullins (1983) also suggests that stock prices and shareholders’ wealth are impacted by initiation and increase of ing to emh in its semi strong form, the information on dividends should be quickly absorbed into the stock prices during the first week and hence the acceptance of the null hypotheses will be consistent with the semi strong efficiency.

The paper analyses the impact of dividend policy of the companies on the share prices and different views of semi-strong form of efficient market hypothesisInternational journal of economics and nd policy may be used as a simple way to signal managers’ view of the company’s recent and future performance (asquth and mullins, 1983).In contrast, the dividend policies of vodafone and burberry are not aimed at a constant payout fact, as the following figure demonstrates, the policies of vodafone and burberry are aimed at dividend of dividend announcement on stock prices”, international journal of information technology and knowledge management, 2 (2), ing to the first regression, dividends do not have a significant impact on the weekly stock returns and hence the null hypothesis related to stock returns is rejected.

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