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Dividend Omission Announcement Effect to Market Reaction in Indonesia Stock Exchange

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  • 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
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    File URL: https://mpra.ub.uni-muenchen.de/88090/1/MPRA_paper_88090.pdf
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    References listed on IDEAS

    as
    1. 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).
    2. 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.
    3. 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.
    4. M. J. Gordon, 1963. "Optimal Investment And Financing Policy," Journal of Finance, American Finance Association, vol. 18(2), pages 264-272, May.
    5. 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.
    6. 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.
    7. 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.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Characteristics of the Company; Dividend Omissions; Market Reactions;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services

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