Impact of Divident Announcement on Share Prices An empirical study of Indian stock exchange

Abstract

There is no other area in the field of finance has been subject to so much of the empirical study during the past four decades as per the behaviour pattern of stock prices. This study tries to newlinestudy the understanding of the pattern of Indian share prices in relation to the announcements of dividend. Dividend announcements are usually considered as the positive signal to the newlineshareholders and its positive impact on the share prices is expected. National Stock exchange rapidly growing exchange and pioneer in automated trading in stocks was taken for the study. newlineLiterature review showed that study in major stock indices of Indian stock exchanges were conducted and their impact on companies share prices was tested but few sectors specific newlinecompanies research were untouched. And that lead the researcher to conduct research on a sector specific companies and those sectors who has major weightage on NSE and whose newlineresearch is not that frequently conducted. A standard event study methodology is used in the work to study the share price responses of total twenty-five listed companies of Auto and IT newlinesectoral index surrounding 21 days of the announcement dates over a period of 10 years. newlineMajor objectives of the study are to check whatever dividend announcement gain to the shareholders or loses their money. Also, this study helps to find overall change or gain or loss newlinethe shareholder gets during the event window because of the dividend announcement. Lastly most important motive to do this research work is to check there is an impact of dividend newlineannouncement on share price. Also, this research helps to identify whether the market is efficient or not? Thus, the studies empirical retrieved results of the sample of 206 dividend announcement of newlinethe companies listed on national Stock Exchange demonstrate that shareholders do not gain any value from the dividend announcement. For the analysis purpose abnormal return and newlinecumulative abnormal return was calculated using the market model. And then to test the significance of the study