Liquidity Reactions Towards Dividend Announcements and Information Efficiency on the Ghana Stock Exchange

Abstract

This study attempts to examine liquidity (stock returns) reaction to subsequent dividend announcements and information efficiency in the Ghanaian Market with a sample of 11 major companies from those listed on the Ghana Stock Exchange (GSE). While employing event studies to measure the event impact, one may find the techniques to outperform the market. This study employs event study methodology. More specifically, it employs the market model in generating abnormal returns surrounding subsequent dividend announcements. The liquidity levels of the studied stocks are very low. Findings show that there is a little informational content of dividend announcements on the Ghana Stock Exchange. The Ghanaian investors hardly consider dividend announcements as favorable news. The stock returns cannot however be conclusively be said to react positively to subsequent dividend announcements in GSE.