IDEAS home Printed from https://ideas.repec.org/a/blg/journl/v16y2021i1p255-269.html
   My bibliography  Save this article

On The Impact Of Dividend Payments On Stock Prices – An Empirical Analysis Of The German Stock Market

Author

Listed:
  • MELCHING Konstantin

    (Fresenius University, Munich, Germany)

  • NGUYEN Tristan

    (Fresenius University, Munich, Germany)

Abstract

This paper examines the relation between dividend payments and stock prices of all firms in the German prime standard DAX 30 in the time period from 2012 to 2019. The irrelevance theory introduced by Miller and Modigliani states that dividend payments must not have an impact on stock prices in a perfect market. In contrast, the signaling theory and the dividend puzzle indicate that dividend payments are likely to have a profound impact on the stock price. According to our findings the ex-dividend decrease of stock prices was significantly smaller than the dividend payment. Nevertheless, the results support the impact of the dividend payment on the share price. Firstly, the existence of the ex-dividend markdown is a proof that dividend payments cause share price losses. Secondly, the study explains in particular that high dividend payments result in high share prices over the examined period. Thirdly, our analysis demonstrates a positive correlation between the dividend and the stock price development according to the signaling theory. Considering the abovementioned results, we can conclude that the share price of a company is highly affected by the decision making of the company regarding the dividend policy.

Suggested Citation

  • MELCHING Konstantin & NGUYEN Tristan, 2021. "On The Impact Of Dividend Payments On Stock Prices – An Empirical Analysis Of The German Stock Market," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 16(1), pages 255-269, April.
    • Handle: RePEc:blg:journl:v:16:y:2021:i:1:p:255-269
    as

    Download full text from publisher

    File URL: http://eccsf.ulbsibiu.ro/RePEc/blg/journl/16120melching.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:blg:journl:v:16:y:2021:i:1:p:255-269. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mihaela Herciu (email available below). General contact details of provider: https://edirc.repec.org/data/feulbro.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.