Abstract
Announcing dividend pay-out policy by a company will signals market firm’s future prospects and changes its stock prices according to dividend signalling theory. By analysis the effect of special dividend announcements for 5 companies listed in NASDAQ for the period of 2014-2018, this study investigates the stock price reactions to special dividend announcement for 40 days around the event and challenges dividend signalling theory. The empirical results calculated both in discrete and logarithmic forms. Only few disordered significant abnormal returns and average abnormal returns occurred according to the t-test. The results show that shareholders do not gain value from announcement of special dividend in NASDAQ stock exchange market. That Results indicated from adjusted market model in this research do not support dividend-signalling theory Hence do not confirm that the announcement of dividend has significant effect on price of shares. In general the results consistent with the Miller and Modigliani (1961) dividend irrelevance hypothesis.
Highlights
The goal of financial managers is to maximizing shareholders wealth
This study examines the effect of special dividend announcement on stock returns in NASDAQ stock market over period of 2014 to 2018
In this study the findings are based on event study methodology which abnormal returns are investigated to see the effect of divided announcement on stock prices
Summary
The goal of financial managers is to maximizing shareholders wealth. Target to maximize a company’s value, which quantifies by the price of its stock. This aim may achieve by paying shareholders dividends, this subject is still unsolved. It is often debate about the impact of dividend policy on stockholders wealth. Dividends signal investors about the future performances of companies. Previous studies found that stock prices react positively once there is announcement of dividend increases and, it react negatively once there is decrease in dividend payout in a company. This paper aims to see if stock prices react once special dividends announces
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