IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/88090.html

Dividend Omission Announcement Effect to Market Reaction in Indonesia Stock Exchange

Author

Listed:
  • Darmawan, Mr

Abstract

This study examined the signalling theory about how the market/investors respond to dividend announcements made by companies listed on the Indonesia Stock Exchange during the period 2008-2012. This period was chosen because the economy and economic growth of Indonesia is relatively stable. In general, the objective of this research is to develop new theoretical approaches, in an effort to resolve the conceptual controversies regarding the impact of dividend policy on firm value. That in detail, in particular, objective: To analyze and empirically test the market reaction to the announcement dividend omissions, as well as Analyze and test empirically the firm-specific characteristics variables that affect the market reaction. The samples are all companies that announced dividend policy for 5 years as many as 242 companies with 729 event announcements. The results showed that in events dividend announcement found a significant reaction from the market. At the announcement of dividend omissions, there are 5 significant observations with 2 observations fit in theory. The study also shows none of the significant characteristics of the company is able to explain the market reaction to dividend announcements.

Suggested Citation

  • Darmawan, Mr, 2018. "Dividend Omission Announcement Effect to Market Reaction in Indonesia Stock Exchange," MPRA Paper 88090, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:88090
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/88090/1/MPRA_paper_88090.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. M. J. Gordon, 1963. "Optimal Investment And Financing Policy," Journal of Finance, American Finance Association, vol. 18(2), pages 264-272, May.
    2. Azizah Ayu Sielvia, 2009. "Pengaruh Dividen Inisiasi dan Dividen Omisi terhadap Return Saham di Bursa Efek Indonesia," Jurnal Siasat Bisnis, Management Development Centre (MDC) Department of Management, Faculty of Business and Economics Universitas Islam Indonesia, vol. 13(2).
    3. Litzenberger, Robert H & Ramaswamy, Krishna, 1982. "The Effects of Dividends on Common Stock Prices: Tax Effects or Information Effects?," Journal of Finance, American Finance Association, vol. 37(2), pages 429-443, May.
    4. Merton H. Miller & Franco Modigliani, 1961. "Dividend Policy, Growth, and the Valuation of Shares," The Journal of Business, University of Chicago Press, vol. 34, pages 411-411.
    5. Litzenberger, Robert H & Ramaswamy, Krishna, 1980. "Dividends, Short Selling Restrictions, Tax-Induced Investor Clienteles and Market Equilibrium," Journal of Finance, American Finance Association, vol. 35(2), pages 469-482, May.
    6. Litzenberger, Robert H. & Ramaswamy, Krishna, 1979. "The effect of personal taxes and dividends on capital asset prices : Theory and empirical evidence," Journal of Financial Economics, Elsevier, vol. 7(2), pages 163-195, June.
    7. Sant, Rajiv & Cowan, Arnold R., 1994. "Do dividends signal earnings? The case of omitted dividends," Journal of Banking & Finance, Elsevier, vol. 18(6), pages 1113-1133, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Philip Brown & Alex Clarke, 1993. "The Ex-Dividend Day Behaviour of Australian Share Prices Before and After Dividend Imputation," Australian Journal of Management, Australian School of Business, vol. 18(1), pages 1-40, June.
    2. Poterba, James M & Summers, Lawrence H, 1984. "New Evidence that Taxes Affect the Valuation of Dividends," Journal of Finance, American Finance Association, vol. 39(5), pages 1397-1415, December.
    3. Arman Kosedag & Jinhu Qian, 2009. "Do Dividend Clienteles Explain Price Reactions To Dividend Changes?," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 3(1), pages 47-57.
    4. Dan Dhaliwal & Shane Heitzman & Oliver Zhen Li, 2006. "Taxes, Leverage, and the Cost of Equity Capital," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 44(4), pages 691-723, September.
    5. Hartzmark, Samuel M. & Solomon, David H., 2013. "The dividend month premium," Journal of Financial Economics, Elsevier, vol. 109(3), pages 640-660.
    6. Frankfurter, George M. & Wood, Bob Jr., 2002. "Dividend policy theories and their empirical tests," International Review of Financial Analysis, Elsevier, vol. 11(2), pages 111-138.
    7. Fuller, Kathleen P. & Goldstein, Michael A., 2011. "Do dividends matter more in declining markets?," Journal of Corporate Finance, Elsevier, vol. 17(3), pages 457-473, June.
    8. Fazakas, Gergely & Kosárka, Judit, 2008. "Osztalékpolitikai elméletek [Dividend policy theories]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 782-806.
    9. Clemens Sialm, 2009. "Tax Changes and Asset Pricing," American Economic Review, American Economic Association, vol. 99(4), pages 1356-1383, September.
    10. Szomko Natalia, 2015. "Investor Reaction to Information on Final Dividend Payouts on the Warsaw Stock Exchange – an Event Study Analysis," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 45(1), pages 127-146, March.
    11. Bell, L. & Jenkinson, T., 2000. "New Evidence of the Impact of Dividend Taxation and on the Identity of the Marginal Investor," Economics Series Working Papers 9924, University of Oxford, Department of Economics.
    12. Imran, Kashif & Usman, Muhammad & Nishat, Muhammad, 2013. "Banks dividend policy: Evidence from Pakistan," Economic Modelling, Elsevier, vol. 32(C), pages 88-90.
    13. Stephanie A. Sikes & Robert E. Verrecchia, 2015. "Dividend tax capitalization and liquidity," Review of Accounting Studies, Springer, vol. 20(4), pages 1334-1372, December.
    14. David G. Kenchington, 2019. "Does a change in dividend tax rates in the U.S. affect equity prices of non-U.S. stocks?," Review of Accounting Studies, Springer, vol. 24(2), pages 593-628, June.
    15. Dahlquist, Magnus & Robertsson, Göran & Rydqvist, Kristian, 2014. "Direct evidence of dividend tax clienteles," Journal of Empirical Finance, Elsevier, vol. 28(C), pages 1-12.
    16. P. J. Engelen, 2006. "An Economic Analysis of the Bekaert NV Insider Trading Case," Working Papers 06-04, Utrecht School of Economics.
    17. Lee, Yi-Tsung & Liu, Yu-Jane & Roll, Richard & Subrahmanyam, Avanidhar, 2006. "Taxes and dividend clientele: Evidence from trading and ownership structure," Journal of Banking & Finance, Elsevier, vol. 30(1), pages 229-246, January.
    18. Donald H. Fehrs & Gary A. Benesh & David R. Peterson, 1988. "Evidence Of A Relation Between Stock Price Reactions Around Cash Dividend Changes And Yields," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 11(2), pages 111-123, June.
    19. Syed Ali Raza, Mohd Zaini Abd Karim, 2016. "Do Liquidity and Financial Leverage Constrain the Impact of Firm Size and Dividend Payouts on Share Price in Emerging Economy," Journal of Finance and Economics Research, Geist Science, Iqra University, Faculty of Business Administration, vol. 1(2), pages 71-86, October.
    20. Kim, Soojung & Park, Soon Hong & Suh, Jungwon, 2018. "A J-shaped cross-sectional relation between dividends and firm value," Journal of Corporate Finance, Elsevier, vol. 48(C), pages 857-877.

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:pra:mprapa:88090. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.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.