Dividend tax, dividend payments and share values: a South African perspective

Abstract

The study investigates the impact of changes in dividend taxes on dividend payment policies and in turn, the impact of dividend payments on share prices. An event study approach is used to analyse the share price movements before, on and after dividend announcement dates. The results for companies of which the dividend paid resulted in an increase in the dividend payout ratio were that share prices responded positively to the announcement on the announcement date and for the few days thereafter. The findings again underline the paradoxical nature of dividends and although a better understanding of the impact of dividends on South African companies was gained, the dividend puzzle remains largely unsolved.