Informationswert von Dividendenausschüttungen: Einfluss von Bardividenden auf die Aktienkurse von produzierenden Unternehmen in Sri Lanka

Informational value of dividend initiations: Impact of cash dividends on share prices of manufacturing companies in Sri Lanka

Andrey Davydenko () and Krishnamoorthy Charith ()
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Andrey Davydenko: Independent Researcher
Krishnamoorthy Charith: Department of Computer Science and Informatics, Faculty of Applied Sciences, Uva Wellassa University, Badulla, Sri Lanka

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Abstract: The shareholder wealth consists of dividends and capital gains. The former is considered to be risk averse, whereas the latter is perceived to be risky. The risk return trade-off in these two returns drives the investor preference. The objective of a for-profit organization is to maximize shareholders’ wealth, however, disbursing dividends may not always be in the best interest of shareholders. Theoretically, retained earnings increase share prices as firms have more funds to be invested. The objective of the study is to measure the stimulus of cash dividends on share prices. We conduct empirical analysis based on data relating to companies listed on the Colombo Stock Exchange (CSE) under the manufacturing sector. As we show in our literature review, in order to reduce the risk of obtaining spurious results, this analysis requires the use of advanced modelling techniques allowing to model non-stationarity of time series, as well the presence of control variables and lagged variables. The novelty of our study is in the use of advanced modelling and data visualisation techniques (including the xdPlot dataviz framework recently proposed by the authors), especially in application to CSE data. We conduct a thorough exploratory data analysis (EDA) aiming to spot data anomalies and initiate appropriate data transformations. Given the results of EDA and the nature of the data available, we select the Arellano-Bond estimator as the most adequate method for regression analysis. Market Price per share (MPS) termed as the dependent variable, whereas Dividend per Share (DPS) is viewed as the independent variable. The results validated theoretical literature such as signaling effect and bird in hand theory, but questioned some previous empirical studies. The study validated cash dividends as stimulus to investors given the positive relationship between DPS and MPS.

Keywords: panel data; dividends; share price; Arellano-Bond estimator; shareholder wealth; exploratory data analysis (EDA); xdPlot framework; Colombo1 dataset; Data transformations; AvgRelMAE; AvgRelMSE; AvgRelAME; Colombo Stock Exchange; log transformation; market price per share (MPS); dividend per share (DPS); panel data unit-root tests; dynamic panel data models (search for similar items in EconPapers)
Date: 2021-02-05
Note: View the original document on HAL open archive server: https://hal.science/hal-03359177
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Published in International Journal of Economics and Finance, 2021, 13 (3), pp.13-30. ⟨10.5539/ijef.v13n3p13⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03359177

DOI: 10.5539/ijef.v13n3p13

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