Dividend Announcements and Capital Asset Pricing: Is There a Clientele Effect?

Abstract

According to the efficient market hypothesis, publicly available information is accessible to all investors at zero cost. Therefore, the security prices might adjust to information as soon as it becomes publicly available. The purpose of the study is to investigate the impact of the announcements of dividends on the price of the stock listed with Dhaka Stock Exchange (DSE). Stock market reactions to dividend announcements introduced the concept of event time, which may well have been the single most important breakthrough in our understanding of how stock prices respond to financing information. The present study is entirely an analytical presentation concentrating on corporate dividends over time which attempts to analyse different theoretical models in explaining the impact of dividend on stock price of the firms on DSE. The findings suggest that there exists announcement impact of dividend on stock price. The most significant price changes occurred in the days prior to the announcement date.