Research Article
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Year 2023, , 76 - 84, 30.06.2023
https://doi.org/10.17261/Pressacademia.2023.1730

Abstract

References

  • Aditya, K., Ashok, M. (2017). Stock price reactions to stock dividend announcements: A case from a sluggish economic period. The North American Journal of Economics and Finance, 42, 338-345.
  • Alamdari, N. (2016). Relationship between ınformation asymmetry and dividend policy of companies listed in TSE. IJBER Journal, 14 (10), 7047-7057
  • Allen, F., Antonio, E., and Ivo, W. (2000). A theory of dividends based on tax clienteles. Journal of Finance, 55, 2499-2536.
  • Benartzi, S., Grullon, G., Michaely, R., Thaler, R. H. (2005). Dividend changes do not signal changes in future profitability. Journal of Business, 78(5), 1659-1682.
  • Bhattacharya, S. (1979). Imperfect information, dividend policy, and the bird in the hand fallacy. Bell Journal of Economics, 10, 259 – 270.
  • Black, F. (1976). The dividend puzzle. Journal of Portfolio Management, 2, 5 – 8.
  • Bowman, G. (1983). Understanding and conducting event studies. Journal of Business Finance and Accounting, 10(4), 561-584.
  • Brown, S., Warner, J. (1985). Using daily stock returns: The case of event studies. Journal of Financial Economics, 14, 3-31.
  • Chou, J.-J., Su, S.-H., Lee, H.-L., & Pho, N. H. (2021). Effects of dividend announcement on the reaction of stock market: Evidence from Vietnamese Stock Market. International Journal of Research in Commerce and Management Studies, 3(2), 113-127.
  • Calvi-Reveyron, M. (1999). Risque de surinvestissement, signalisation et annonce de dividende: le cas français. Finance Contrôle Stratégie, 2(3), 115-145.
  • Chatterjee, C., Dutta, P. (2017). Price behavior around dividend announcements in the ındian equity market in the existence of corporate dividend tax. Global Business Review, 18(2), 402–415.
  • Cheng, T., Fung, G., Leung, Y. (2007). Information effects of dividends: Evidence from the Hong Kong market. Review of Quantitative Finance and Accounting, 28(1), 23-54.
  • Conroy, M., Eades, M., Harris, S. (2000). A test of the relative pricing effects of dividends and earnings: Evidence from simultaneous announcements in Japan. Journal of Finance, 55(3), 1199-1227.
  • Denis, J., Denis, K., Sarin, A. (1994). The information content of dividend changes: Cash flow signalling, overinvestment, and dividend clienteles. Journal of Financial and Quantitative Analysis, 29, 567-587.
  • Hariyanto, I. T., & Mruhadi, W. R. (2021). The phenomenon of dividend announcement on stock abnormal return (Case in ASEAN Countries). Journal Manajemen Bisnis, 12(1), 1-18.
  • Harada, K., Nguyen, P. (2005). Dividend change context and signalling efficiency in Japan. Pacific Basin Finance Journal, 13, 504-522.
  • Jensen, M. (1986). Agency cost of free cash flows, corporate finance and takeovers. American Economic Review, 76, 323-329.
  • Jensen, R., Johnson, R. (1995). Discount rate changes and security returns in the U.S. 1962-1991. Journal of Baking and Finance, 19 (1), 79-95.
  • John, K., Lang, P. (1991). Insider trading around dividend announcements: Theory and evidence. The Journal of Finance, 46 (4), 1361-1389.
  • John, K., Williams, J. (1985). Dividends, dilution, and taxes: a signalling equilibrium. Journal of Finance, 40, 1053 – 1070.
  • Lotfi, T. (2018). Dividend policy in Tunisia: a signalling approach. International Journal of Economics and Finance, 10 (4), 84-94.
  • Mac Kinlay, C. (1997). Event studies in economics and finance. Journal of Economic Literature, 35, 13-39.
  • McClusky, T., Burton, B. M., Power, D. M., Sinclair, C. D. (2006). Evidence on the Irish stock marketís reaction to dividend announcements. Applied Financial Economics, 16(8), 617-628.
  • McWilliams, A., Siegel, D. (1997). Events studies in management research: Theoretical and empirical issues. Academy of Management Journal, 40(3), 568-592.
  • Miller, H., Modigliani, F. (1961). Dividend policy, growth, and the valuation of shares. Journal of Business, 34, 411 – 433.
  • Miller, H., Rock, K. (1985). Dividend policy under asymmetric information. Journal of Finance, 40, 1031-1051.
  • Nidar, S., Maraya, M. (2021). Market reaction to stock dividend announcement. International Journal of Governance and Financial Intermediation, 1 (2), 120-126.
  • Ozo, K., Arun, G. (2019). Stock market reaction to cash dividends: evidence from the Nigerian stock market. Managerial Finance, 45 (3), 366-380.
  • Om, D., & Goel, S. (2018). Effect of dividend announcement on stock prices: An empirical study on the listed private companies in BSE. Utopia of Global Education, 4(2), 92-110.
  • Peterson, P. (1989). Event studies: A review of issues and methodology. Quarterly Journal of Business and Economics, 28(3), 36-66.
  • Poulain-Rehm T. (2005). L’impact de l’affectation du free cash flow sur la création de valeur actionnariale: le cas de la politique d’endettement et de dividendes des entreprises françaises cotées. Revue Finance Contrôle Stratégie, 8 (4), 205-238.
  • Pournima, D., Huma, M. (2021). A Systematic Review of Dividend Announcement and Its Impact on the Stock Prices: Evidence from Indian Service Providing Companies. Journal of Accounting Research & Audit Practices, 20 (3), 43-59.
  • Schweitzer, R. (1989). How Do Stock Returns React to Special Events? Business Review, Federal Reserve Bank of Philadelphia, 17-29.
  • Seyedimany, A. (2019). Stock price reactions on NASDAQ Stock Exchange for special dividend announcements. Emerging Science Journal, 3(6), 382-388.
  • Zahan, A., & Rana, S. (2020). Stock price reaction to dividend announcement: An empirical study on Dhaka Stock Exchange (DSE). Journal of Management, Economics, and Industrial Organization, 1-27

THE IMPACT OF DIVIDEND DISTRIBUTION ANNOUNCEMENTS ON STOCK PRICES: AN EVENT STUDY AT THE ISTANBUL STOCK EXCHANGE

Year 2023, , 76 - 84, 30.06.2023
https://doi.org/10.17261/Pressacademia.2023.1730

Abstract

Purpose- The dividend is an essential part of the company's financial image. Because of its long-term growth, it is an overall source of return for an investor and a reliable predictor of the company's valuation. According to dividend distribution theory, when a corporation decides to disclose its dividend payment policy to indicate the market where it is now processing prospects, the price of its shares changes. The purpose of this article is to show how share prices on the Istanbul Stock Exchange react after dividends are distributed.
Methodology- The data from the Daily returns Series from the Turkish Financial Market between 2011 and 2017 was used to fulfill the goal of the study. The effect of the32 dividend announcement events for 8 banks on the 20-day announced stock price was examined using an event study approach which aid in predicting what stocks will look like in response to an event announcement.
Findings- The findings revealed that the market response was positive and the stock values have increased after dividend announcements. The market models CAR(5.0) and CAR(10.0) have statistically significant abnormal returns (AR0) and abnormal cumulative returns. Also, The tracking of the daily average return separately for each day showed that AAR's profit distribution day was 0.49 %, the fourth day had the highest positive increase of 0.56 %, and the fifth day had a positive high positive return of 0.47 %.
Conclusion- The results of this empirical study show that stock prices change after dividend announcements, and that support the dividend notification theory, which states that dividend announcements have a significant impact on stock prices. The researchers propose extending the run window to 61 days rather than 21 days in order to monitor the continued decline ten days after the event.

References

  • Aditya, K., Ashok, M. (2017). Stock price reactions to stock dividend announcements: A case from a sluggish economic period. The North American Journal of Economics and Finance, 42, 338-345.
  • Alamdari, N. (2016). Relationship between ınformation asymmetry and dividend policy of companies listed in TSE. IJBER Journal, 14 (10), 7047-7057
  • Allen, F., Antonio, E., and Ivo, W. (2000). A theory of dividends based on tax clienteles. Journal of Finance, 55, 2499-2536.
  • Benartzi, S., Grullon, G., Michaely, R., Thaler, R. H. (2005). Dividend changes do not signal changes in future profitability. Journal of Business, 78(5), 1659-1682.
  • Bhattacharya, S. (1979). Imperfect information, dividend policy, and the bird in the hand fallacy. Bell Journal of Economics, 10, 259 – 270.
  • Black, F. (1976). The dividend puzzle. Journal of Portfolio Management, 2, 5 – 8.
  • Bowman, G. (1983). Understanding and conducting event studies. Journal of Business Finance and Accounting, 10(4), 561-584.
  • Brown, S., Warner, J. (1985). Using daily stock returns: The case of event studies. Journal of Financial Economics, 14, 3-31.
  • Chou, J.-J., Su, S.-H., Lee, H.-L., & Pho, N. H. (2021). Effects of dividend announcement on the reaction of stock market: Evidence from Vietnamese Stock Market. International Journal of Research in Commerce and Management Studies, 3(2), 113-127.
  • Calvi-Reveyron, M. (1999). Risque de surinvestissement, signalisation et annonce de dividende: le cas français. Finance Contrôle Stratégie, 2(3), 115-145.
  • Chatterjee, C., Dutta, P. (2017). Price behavior around dividend announcements in the ındian equity market in the existence of corporate dividend tax. Global Business Review, 18(2), 402–415.
  • Cheng, T., Fung, G., Leung, Y. (2007). Information effects of dividends: Evidence from the Hong Kong market. Review of Quantitative Finance and Accounting, 28(1), 23-54.
  • Conroy, M., Eades, M., Harris, S. (2000). A test of the relative pricing effects of dividends and earnings: Evidence from simultaneous announcements in Japan. Journal of Finance, 55(3), 1199-1227.
  • Denis, J., Denis, K., Sarin, A. (1994). The information content of dividend changes: Cash flow signalling, overinvestment, and dividend clienteles. Journal of Financial and Quantitative Analysis, 29, 567-587.
  • Hariyanto, I. T., & Mruhadi, W. R. (2021). The phenomenon of dividend announcement on stock abnormal return (Case in ASEAN Countries). Journal Manajemen Bisnis, 12(1), 1-18.
  • Harada, K., Nguyen, P. (2005). Dividend change context and signalling efficiency in Japan. Pacific Basin Finance Journal, 13, 504-522.
  • Jensen, M. (1986). Agency cost of free cash flows, corporate finance and takeovers. American Economic Review, 76, 323-329.
  • Jensen, R., Johnson, R. (1995). Discount rate changes and security returns in the U.S. 1962-1991. Journal of Baking and Finance, 19 (1), 79-95.
  • John, K., Lang, P. (1991). Insider trading around dividend announcements: Theory and evidence. The Journal of Finance, 46 (4), 1361-1389.
  • John, K., Williams, J. (1985). Dividends, dilution, and taxes: a signalling equilibrium. Journal of Finance, 40, 1053 – 1070.
  • Lotfi, T. (2018). Dividend policy in Tunisia: a signalling approach. International Journal of Economics and Finance, 10 (4), 84-94.
  • Mac Kinlay, C. (1997). Event studies in economics and finance. Journal of Economic Literature, 35, 13-39.
  • McClusky, T., Burton, B. M., Power, D. M., Sinclair, C. D. (2006). Evidence on the Irish stock marketís reaction to dividend announcements. Applied Financial Economics, 16(8), 617-628.
  • McWilliams, A., Siegel, D. (1997). Events studies in management research: Theoretical and empirical issues. Academy of Management Journal, 40(3), 568-592.
  • Miller, H., Modigliani, F. (1961). Dividend policy, growth, and the valuation of shares. Journal of Business, 34, 411 – 433.
  • Miller, H., Rock, K. (1985). Dividend policy under asymmetric information. Journal of Finance, 40, 1031-1051.
  • Nidar, S., Maraya, M. (2021). Market reaction to stock dividend announcement. International Journal of Governance and Financial Intermediation, 1 (2), 120-126.
  • Ozo, K., Arun, G. (2019). Stock market reaction to cash dividends: evidence from the Nigerian stock market. Managerial Finance, 45 (3), 366-380.
  • Om, D., & Goel, S. (2018). Effect of dividend announcement on stock prices: An empirical study on the listed private companies in BSE. Utopia of Global Education, 4(2), 92-110.
  • Peterson, P. (1989). Event studies: A review of issues and methodology. Quarterly Journal of Business and Economics, 28(3), 36-66.
  • Poulain-Rehm T. (2005). L’impact de l’affectation du free cash flow sur la création de valeur actionnariale: le cas de la politique d’endettement et de dividendes des entreprises françaises cotées. Revue Finance Contrôle Stratégie, 8 (4), 205-238.
  • Pournima, D., Huma, M. (2021). A Systematic Review of Dividend Announcement and Its Impact on the Stock Prices: Evidence from Indian Service Providing Companies. Journal of Accounting Research & Audit Practices, 20 (3), 43-59.
  • Schweitzer, R. (1989). How Do Stock Returns React to Special Events? Business Review, Federal Reserve Bank of Philadelphia, 17-29.
  • Seyedimany, A. (2019). Stock price reactions on NASDAQ Stock Exchange for special dividend announcements. Emerging Science Journal, 3(6), 382-388.
  • Zahan, A., & Rana, S. (2020). Stock price reaction to dividend announcement: An empirical study on Dhaka Stock Exchange (DSE). Journal of Management, Economics, and Industrial Organization, 1-27
There are 35 citations in total.

Details

Primary Language English
Subjects Business Administration
Journal Section Articles
Authors

Hasan Halıfe This is me 0000-0003-3925-7084

Sakina Karroum This is me 0000-0001-5073-5791

Publication Date June 30, 2023
Published in Issue Year 2023

Cite

APA Halıfe, H., & Karroum, S. (2023). THE IMPACT OF DIVIDEND DISTRIBUTION ANNOUNCEMENTS ON STOCK PRICES: AN EVENT STUDY AT THE ISTANBUL STOCK EXCHANGE. Journal of Economics Finance and Accounting, 10(2), 76-84. https://doi.org/10.17261/Pressacademia.2023.1730

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