Impact of Dividend Announcement on Share Price: Evidence from Colombo Stock Exchange

Author(s)

HH Dedunu ,

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Volume 7 - December 2018 (12)

Abstract

This study investigates the Impact of Dividend Announcement on Share Prices of listed companies in Colombo Stock Exchange for the period of 2016 to 2017. The first and final Dividend Announcement data and Share Prices were extracted from 47 listed companies in CSE. This study’s sample belongs to 60 Dividend Announcements in the period from 2016 to 2017. The Standard Event Study Methodology is used to examine the stock market response to Dividend Announcements and both Market Model, and Regression Analysis Methods were applied to analyse collected data in relation to computing the Abnormal Return, Excess Return, and Average Abnormal Return and T Values surrounding the Dividend Announcement date. The positive Abnormal Return indicates that there is an impact on Share Prices that means the Share Prices have been increased surrounding the event date. The corporate literature for Dividend Announcements on market response provide mix results as some of the prior literature suggests that there is a direct relationship between firm’s Dividend Announcement and Share Price and some studies suggest that there is no relationship between Dividend Announcements and Share Prices. This study has studied those contradicting theories, and the finding shows that Dividend Announcements do not lead to positive or negative market reactions towards Market Prices in the Colombo Stock Exchange.

Keywords

Share Price, Colombo Stock Exchange, Impact of Dividend 

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