The stock market reaction to dividend announcements: A UK study of complex market signals
AbstractInvestigates the stock market response to interactive dividend and earnings announcements by a sample of 620 UK companies over the period January to June 1991. First, examines the possibility that the response to a dividend announcement may be influenced by whether the dividend is being increased, decreased or left unchanged. US studies suggest that this may indeed be the case and acknowledge the role of the dividend as a signal to investors; dividend increases tend to be associated with positive abnormal returns, and dividend decreases tend to be associated with negative abnormal returns around the time of the dividend announcement. Second, recognizes that identifying a unique dividend information announcement effect is particularly difficult in the UK because UK dividends are almost invariably announced simultaneously with information about corporate earnings. Addresses this problem by focusing on those occasions when the signals associated with these announcements conflict with one another - where dividends are increased and earnings decrease or vice versa. The influence of combinations of dividend and earnings news is found to be important in explaining the share price reaction on the announcement day.
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Bibliographic InfoArticle provided by Emerald Group Publishing in its journal Journal of Economic Studies.
Volume (Year): 23 (1996)
Issue (Month): 1 (January)
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Web page: http://www.emeraldinsight.com
Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
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- Jais, Mohamad & Abdul Karim, Bakri & Funaoka, Kenta & Abidin, Azlan Zainol, 2009. "Dividend Announcements and Stock Market Reaction," MPRA Paper 19779, University Library of Munich, Germany.
- Thomas McCluskey & Bruce Burton & David Power, 2007. "Evidence on Irish financial directors' views about dividends," Qualitative Research in Accounting & Management, Emerald Group Publishing, vol. 4(2), pages 115-132, July.
- Muhammad Akbar & Humayun Habib Baig, 2010. "Reaction of Stock Prices to Dividend Announcements and Market Efficiency in Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 15(1), pages 103-125, Jan-Jun.
- Thomas McCluskey & Aoife Broderick & Amanda Boyle & Bruce Burton & David Power, 2010. "Evidence on Irish financial analysts' and fund managers' views about dividends," Qualitative Research in Financial Markets, Emerald Group Publishing, vol. 2(2), pages 80-99, October.
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