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Dividend Policies and Price-Volume Reactions to Cash Dividends on the Stock Market: Evidence from the Istanbul Stock Exchange

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  • Amustafa Kemal Yilmaz
  • Guzhan Gulay

Abstract

This study examines the effects of cash dividend payments on stock returns and trading volumes in the stock market. It also investigates whether there is any difference in the investment behavior of investors with respect to the dividend pay out ratio and size in the Istanbul Stock Exchange (ISE)from 1995 to 2003. Prices start to rise a few sessions before cash dividend payments, and on the ex-dividend day, they fall less than do dividend payments, finally decreasing in the sessions following the payment. Trading volume shows a considerable upward shift before the payment date and, interestingly, is stable after Thus, cash dividends influence prices and trading volumes in different ways before, at, and after payment, providing some profitable active trading strategy opportunities around the ex-dividend day. The findings support price-volume reaction discussions on the divident payment date and the significant effect of cash dividends on the stock market.

Suggested Citation

  • Amustafa Kemal Yilmaz & Guzhan Gulay, 2006. "Dividend Policies and Price-Volume Reactions to Cash Dividends on the Stock Market: Evidence from the Istanbul Stock Exchange," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 42(4), pages 19-49, July.
  • Handle: RePEc:mes:emfitr:v:42:y:2006:i:4:p:19-49
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    References listed on IDEAS

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    8. Frank, Murray & Jagannathan, Ravi, 1998. "Why do stock prices drop by less than the value of the dividend? Evidence from a country without taxes," Journal of Financial Economics, Elsevier, vol. 47(2), pages 161-188, February.
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    Cited by:

    1. Kumar, Satish, 2017. "New evidence on stock market reaction to dividend announcements in India," Research in International Business and Finance, Elsevier, pages 327-337.
    2. Atakan Yalçın & Nuri Ersşahin, 2011. "Does the Conditional CAPM Work? Evidence from the Istanbul Stock Exchange," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(4), pages 28-48, July.
    3. Chia-Ying Chan & Vivian W. Tai & Kuo-An Li & Ranko Jelic, 2012. "Do Market Participants Favor Employee Stock Option Schemes? Evidence from Taiwan," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(0), pages 110-132, January.
    4. Jen-Chang Liu & Mark Yeats, 2015. "The Anomaly of 28 Days Between the Ex-Dividend and Payment Dates in Taiwanese Stock Markets," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(9), pages 1091-1118, September.
    5. repec:eco:journ1:2017-02-50 is not listed on IDEAS
    6. repec:eee:glofin:v:34:y:2017:i:c:p:1-15 is not listed on IDEAS
    7. Cahit Adaoglu, 2008. "Dividend Policy of the ISE Industrial Corporations: The Evidence Revisited (1986-2007)," Journal of BRSA Banking and Financial Markets, Banking Regulation and Supervision Agency, vol. 2(2), pages 113-135.
    8. Chia-Ying Chan & Vivian W. Tai & Kuo-An Li & Ranko Jelic, 2012. "Do Market Participants Favor Employee Stock Option Schemes? Evidence from Taiwan," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(0), pages 110-132, January.
    9. Atakan Yalçın & Nuri Ersşahin, 2011. "Does the Conditional CAPM Work? Evidence from the Istanbul Stock Exchange," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(4), pages 28-48, July.

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