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The Announcement Effect of Cash Dividend Changes on Share Prices: An Empirical Analysis of China

Author

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  • Dar-Hsin Chen
  • Hsiang-Hsi Liu
  • Cheng-Ting Huang

Abstract

An event study using a sample of cash dividend changes from all listed A-share firms in China during the period from 2000 to 2004 was conducted to investigate the announcement effect of cash dividend changes and examine whether the dividend-signaling hypothesis holds in China's stock markets. The results indicate that the announcement of cash dividend changes has a positive influence on share prices, but only partly support the dividend-signaling hypothesis. The study also found that there is no great dissimilarity between the announcement effects of cash dividend changes for different stock markets in China. However, the announcement effect of cash dividend changes for different sample periods exhibits distinct differences that may have a close connection with the promulgation and execution of two administrative rules. Cross-sectional analysis shows that both cash dividend yield and the ratio of nonfloating shares have explanatory power on the announcement effect of cash dividend changes.

Suggested Citation

  • Dar-Hsin Chen & Hsiang-Hsi Liu & Cheng-Ting Huang, 2009. "The Announcement Effect of Cash Dividend Changes on Share Prices: An Empirical Analysis of China," Chinese Economy, Taylor & Francis Journals, vol. 42(1), pages 62-85, January.
    • Handle: RePEc:mes:chinec:v:42:y:2009:i:1:p:62-85
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    Citations

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    Cited by:

    1. Nagendra Marisetty & M. Suresh Babu, 2023. "Stocks Abnormal Returns and Rate of Dividend Announcements," International Journal of Business and Management, Canadian Center of Science and Education, vol. 16(11), pages 1-33, February.
    2. Darakhshan Younis & Attiya Yasmin Javid, 2014. "Market Imperfections and Dividend Policy Decisions of Manufacturing Sector of Pakistan," PIDE-Working Papers 2014:99, Pakistan Institute of Development Economics.
    3. Ding, Li & Lam, Hugo K.S. & Cheng, T.C.E. & Zhou, Honggeng, 2018. "A review of short-term event studies in operations and supply chain management," International Journal of Production Economics, Elsevier, vol. 200(C), pages 329-342.
    4. Sadaf Anwar & Shveta Singh & P. K. Jain, 2017. "Impact of Cash Dividend Announcements: Evidence from the Indian Manufacturing Companies," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 16(1), pages 29-60, April.
    5. Syed Akif Shah & Umara Noreen, 2016. "Stock Price Volatility and Role of Dividend Policy: Empirical Evidence from Pakistan," International Journal of Economics and Financial Issues, Econjournals, vol. 6(2), pages 461-472.
    6. Dr. Jeetendra Dangol, 2016. "Nepalese Stock Market Efficiency in Respect of Cash and Stock Dividend Announcement," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 7(3), pages 60-71, September.
    7. Deng, Lu & Li, Sifei & Liao, Mingqing, 2017. "Dividends and earnings quality: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 48(C), pages 255-268.
    8. Kehinde Adesina & Uwalomwa Uwuigbe & Olubukola Ranti Uwuigbe & Osariemen Asiriuwa & Sylvester Oriabe, 2017. "Dividend Policy and Share Price Valuation in Nigerian Banks," EuroEconomica, Danubius University of Galati, issue 1(36), pages 185-195, May.
    9. Jack J.W. Yang & Tsung-Hsin Wu, 2015. "Announcement Effect of Cash Dividend Changes around Ex-Dividend Days: Evidence from Taiwan," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 9(2), pages 77-91.
    10. Naheed Rabbani, 2017. "The Announcement Effect of Cash Dividend Changes on Share Prices: Evidence from Dhaka Stock Exchange," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 20(04), pages 1-19, December.

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