Signalling power of cash dividend announcements and risk: evidence from India

Sadaf Anwar, Shveta Singh and P.K. Jain

International Journal of Management Practice, 2016, vol. 9, issue 3, 257-281

Abstract: An increasingly important issue in the study of financial markets is to understand the causes of the apparent abnormal equity price drifts or anomalies that are shown to follow various types of corporate events. This issue has been addressed in this paper in context of cash dividend announcements. The objective of this paper is to examine the impact of the announcement of 'pure' cash dividends on stock market returns and associated risk (if any) using the 'Event Study Methodology'. The sample consists of the Bombay Stock Exchange (BSE) 500 index non-finance companies. The period of the study is 2003-2013. Cash dividend announcements have information content to effect a change in prices leading to positive average abnormal returns. The findings lend support to dividend signalling hypothesis for the sample companies.

Keywords: event study methodology; India; cash dividends; AARs; average abnormal returns; CAARs; cumulative average abnormal returns; signalling power; cash dividend announcements; risk; stock market returns; stock markets. (search for similar items in EconPapers)
Date: 2016
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