Market Reactions to Dividend Announcements Under Different Business Cycles

Sagi Akron

Emerging Markets Finance and Trade, 2011, vol. 47, issue 0s5, 72-85

Abstract: In this paper, I examine the impact of business cycles on the market reaction to dividend announcements of large-cap firms in the Tel Aviv Stock Exchange. The findings show that the 2001-7 significant positive first-day dividend announcement reaction is derived from the significantly stronger market reaction during the crisis period of 2001-2. Hence, I conclude that the business cycle is a critical parameter in the investors' interpretation of dividend announcements. During busts, a dividend announcement is perceived as a strong and reliable signal about the state of the corporation, compared to times of normality.

Keywords: dividend announcement reaction; efficient market hypothesis; business cycles (search for similar items in EconPapers)
Date: 2011
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