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UK interim and final dividend reductions: a note on price reaction


  • Balasingham Balachandran


Price reactions to interim and final dividend reductions are found to be significantly negative and stronger for interim dividend reductions. Although the market reacted negatively around final dividend reduction announcements it bounced back to its prior level within one month of the announcements. The magnitude of price reactions to dividend reductions is found to be statistically related to the size of the dividend reduction, the post-announcement effect from day 2 to day 20, the pre-announcement effect from day -20 to day -2, the gearing ratio and the dummy variable interim versus final dividend reduction.

Suggested Citation

  • Balasingham Balachandran, 2003. "UK interim and final dividend reductions: a note on price reaction," The European Journal of Finance, Taylor & Francis Journals, vol. 9(4), pages 379-390.
  • Handle: RePEc:taf:eurjfi:v:9:y:2003:i:4:p:379-390
    DOI: 10.1080/1351847022000028430

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    References listed on IDEAS

    1. Chinmoy Ghosh & J. Randall Woolridge, 1988. "An Analysis Of Shareholder Reaction To Dividend Cuts And Omissions," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 11(4), pages 281-294, December.
    2. Balasingham Balachandran & John Cadle & Michael Theobald, 1999. "Analysis of price reactions to interim dividend reductions — a note," Applied Financial Economics, Taylor & Francis Journals, vol. 9(4), pages 305-314.
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    8. Ambarish, Ramasastry & John, Kose & Williams, Joseph, 1987. " Efficient Signalling with Dividends and Investments," Journal of Finance, American Finance Association, vol. 42(2), pages 321-343, June.
    9. Balasingham Balachandran & John Cadle & Michael Theobald, 1996. "Interim dividend cuts and omissions in the UK," European Financial Management, European Financial Management Association, vol. 2(1), pages 23-38.
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