| Pub. Date | : Oct, 2018 |
|---|---|
| Product Name | : The IUP Journal of Applied Finance |
| Product Type | : Article |
| Product Code | : IJAF11810 |
| Author Name | : Karamjeet Kaur |
| Availability | : YES |
| Subject/Domain | : Finance |
| Download Format | : PDF Format |
| No. of Pages | : 13 |
This study finds positive reaction of stock market to the announcements of cash dividend increases in India. 560 events of dividend increase announcements of NSE listed companies have been studied with the help of Comparison Period Return Approach (CPRA). The results found that 56% events generated positive and significant return of 0.87% on the announcement day, which is highest and significant. The positive reaction starts five days before the formal announcement of dividends and it continues after two days of the dividend announcements.
Dividend decision is one of the important decisions a finance manager takes. It is concerned with the distribution of profits of the firm. The dividend policy includes the percentage of earnings paid to stockholders in cash dividends, the stability of absolute dividends about a trend, stock dividends, stock splits and the repurchase of stock (Rao, 1994; and Van Horne, 2002). Miller and Modigliani (MM) (1961) made a comprehensive argument for irrelevancy of dividend payout. They say that dividend does not affect the wealth of shareholders. They argue that the value of the firm is determined by the earning power of the firms' assets or its investment policy, and the manner in which earning stream is split between the dividends and retained earnings does not affect this value.
Applied Finance Journal.