Abstract
The present research study examined the impact of different dividend rate announcements on stocks prices in the Indian stock market. Stocks selected from S&P BSE 500 index and study period from 2008 – 2017. The sample used for this study is 1755 pure cash dividend announcements (492 large-caps, 425 mid-caps, and 838 small-caps). Dividend rates are classified into six classifications to test the stocks' abnormal returns to different dividend classifications. Event methodology market model used to calculate Average Abnormal Returns (AAR) and Cumulative Average Abnormal Returns (CAAR). The results were observed twenty-one times based on market capitalization and dividend rate wise for a final dividend announcement. The results of the study are not the same for different dividend rate classifications and different market capitalizations. The study found positive abnormal returns on event day in most of the classifications, and it is similar to Litzenberger and Ramaswamy (1982), Asquith and Mullins Jr (1983), Grinblatt, Masulis and Titman (1984), Chen, Nieh, Da Chen, and Tang (2009) and many previous research results studied in major developed stock markets and emerging stock markets. Full sample and small-cap final dividend rate 100 percent to 199 percent average abnormal returns are positively significant, and other final dividend rate classification abnormal returns are positive in most of the observations, but returns are not significant. Large-cap average abnormal returns are more sensitive to different dividend rates, and small-cap reacts positively in all classifications. So, different market capitalization final dividend actions impact on stocks in India varies in different dividend rate classifications.
Highlights
In the last fifteen years, the world economy has suffered primarily due to the event of economic issues and adverse shocks, for example, beginning with the 2008-2009 world financial crisis, the 2010-2012 European Union Sovereign crisis, and the 2014-2016 Global Commodity Price realignment
From the above table 7, it can be observed that full sample, large mid-cap and small-cap final dividend announcements 50 percent to 99 percent rate abnormal returns are in positive on event day, but the mid-cap average abnormal return is very close to zero percent
The present research study examined the impact of different dividend rate announcements on stocks prices in the Indian stock market
Summary
In the last fifteen years, the world economy has suffered primarily due to the event of economic issues and adverse shocks, for example, beginning with the 2008-2009 world financial crisis, the 2010-2012 European Union Sovereign crisis, and the 2014-2016 Global Commodity Price realignment. Especially after 1991 liberalization, the Indian capital market has made tremendous improvement in all the sectors as reflected by increased companies & their corporate announcements, different type of securities, financial institutions, intermediaries, stock exchange business, foreign direct & indirect investments, volume of savings, investments and last but the least retail investors from all the classes of people. Gupta, Dogra, Vashisht and Ghai (2012), Dasilis (2007) do not support the efficient market hypothesis It is observed from the review of literature that researchers express contradict opinions on the impact of dividend announcements on stock prices in the world markets. The paper divides into second section review of literature, third section research methodology, fourth section data analysis and interpretation and fifth section is conclusion and references
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