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Cash Dividend Announcements and Stock Return Volatility: Evidence from India

Author

Listed:
  • Sadaf Anwar

    (Indian Institute of Technology, New Delhi, India)

  • Shveta Singh

    (Indian Institute of Technology, New Delhi, India)

  • P K Jain

    (Indian Institute of Technology, New Delhi, India)

Abstract

It is generally accepted that cash dividend announcements are indicative of the future financial performance of the firm. Using ?event study methodology?, the study has examined the effect of cash dividend announcements on stock returns (abnormal returns, if any) volatility that reflect investors? expectations of risk and return. The results have provided strong support for ?Signaling? and ?Risk Information? hypotheses conveying that the volatility of stock returns increased post cash dividend announcement due to decline in firm?s risk; but no significant results were reported for stock returns volatility due to dividend announcements. These findings are consistent with ?Maturity hypothesis? requiring firms to pay more dividends on attaining maturity, as a result entering into slower growth period. An important implication of this study is that, managers may employ dividend policy to influence their stock?s risk and to the investors? affecting their portfolios? risk/return composition. This paper contributes to the deficient literature on cash dividend announcements and stock returns volatility in particular, in emerging economies such as India.

Suggested Citation

  • Sadaf Anwar & Shveta Singh & P K Jain, 2015. "Cash Dividend Announcements and Stock Return Volatility: Evidence from India," Proceedings of Economics and Finance Conferences 2204432, International Institute of Social and Economic Sciences.
    • Handle: RePEc:sek:iefpro:2204432
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    File URL: https://iises.net/proceedings/4th-economics-finance-conference-london/table-of-content/detail?cid=22&iid=005&rid=4432
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    Citations

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    Cited by:

    1. Sunkung Choi, 2023. "Measuring economic diplomacy using event study method: the case of EU-China summit talks and Airbus stock price changes," Asia Europe Journal, Springer, vol. 21(2), pages 155-171, June.
    2. Huang, Xuan & An, Haizhong & Fang, Wei & Gao, Xiangyun & Wang, Lijun & Sun, Xiaoqi, 2016. "Impact assessment of international anti-dumping events on synchronization and comovement of the Chinese photovoltaic stocks," Renewable and Sustainable Energy Reviews, Elsevier, vol. 59(C), pages 459-469.

    More about this item

    Keywords

    India; Event Study; Signaling;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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