EFFECT OF DIVIDEND ANNOUNCEMENTS ON FIRM VALUE IN THE BANKING SECTOR: EVIDENCE FROM ISTANBUL STOCK EXCHANGE

Abstract

The literature suggests that cash dividend announcements typically have a positive effect on stock prices. However, there has been insufficient exploration into the price effect of dividend announcements specifically within the banking sector. Hence, this study investigates the price effect of dividend announcements among banks listed on the Istanbul Stock Exchange. Dividend announcements spanning from 2008 to 2022 were analyzed using the event study method. Abnormal returns of stocks during the three-day window surrounding the dividend announcements were employed as the dependent variable, while dividend change and dividend yield served as independent variables. The analysis revealed no significant relationship between abnormal returns and dividend change/dividend yield variables. These findings remained consistent across both small and large-cap banks, indicating that dividend announcements do not affect stock prices. This observation is attributed to the likelihood of a low level of asymmetric information between investors and managers, stemming from heightened auditing standards and transparency within the banking sector.

Keywords

• Cash Dividend Announcements
• Stock Prices
• Banking Sector
• Case Study

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