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The Weekend-Dividend Effect in the Spanish Market

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  • Gardeazabal, Javier
  • Regúlez Castillo, Marta

Abstract

In this paper we develop an econometric test of a corollary of the irrelevance of the dividend policy principle, namely, that the rescheduling of dividends does not affect the market valuation of the firm. In particular, the market value of the firm should not change if the firm reschedules dividends from one day to another day. This proposition is tested by regressing daily stock returns on a weekend dummy, a dividend dummy and their interaction. The first two variables should capture the weekend and dividend effects. The interaction term should be insignificant if rescheduling of dividends does not affect the market valuation of stocks. Formal econometric evidence finds no indication of a significant weekend effect, though, at the individual level, some stocks yield abnormal returns on ex-dividend days and when dividends are scheduled on days after weekends or holidays. Firms could partially make up the price drop on ex-dividend days by scheduling dividend payments after a weekend or a holiday. However, the evidence suggests that firms do not use such policy.

Suggested Citation

  • Gardeazabal, Javier & Regúlez Castillo, Marta, 2002. "The Weekend-Dividend Effect in the Spanish Market," DFAEII Working Papers 1988-088X, University of the Basque Country - Department of Foundations of Economic Analysis II.
    • Handle: RePEc:ehu:dfaeii:6731
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    File URL: https://addi.ehu.es/handle/10810/6731
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    Cited by:

    1. Stefanescu, Razvan & Dumitriu, Ramona & Nistor, Costel, 2009. "Investigation about the presence of the day – of - the - week effect in the Bucharest Stock Exchange," MPRA Paper 41749, University Library of Munich, Germany, revised 19 Nov 2009.

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