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Declaration Effect of Cash & Stock Dividends on Share Price: An Empirical Study on Dhaka Stock Exchange


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1 Department of Business Administration, Northern University Bangladesh, Bangladesh
 

This study analyzes the impact of different types of dividend declaration, namely stock and cash dividends. Using event studymethod, MAAR and CAAR, this study found no evidence of abnormal returns on the declaration day for either of the types of dividends. However, significant negative returns are reported on days prior to the declaration day for stock dividend, indicating speculative nature of the investors. Furthermore, it provides positive returns during the post-announcement period as the investors realize the chance of potential gains. However, as far as cash dividend is concerned companies listed under DSE do not provide any significant abnormal returns during the 60 days event window. For CAAR, no significant return is reported for cash dividend, while stock dividend provided a maximum 5.6% abnormal returns during the post announcement period.


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  • Declaration Effect of Cash & Stock Dividends on Share Price: An Empirical Study on Dhaka Stock Exchange

Abstract Views: 213  |  PDF Views: 72

Authors

Lutfor Rahman
Department of Business Administration, Northern University Bangladesh, Bangladesh
Mohammad Ruhul Amin
Department of Business Administration, Northern University Bangladesh, Bangladesh
Noman Siddikee
Department of Business Administration, Northern University Bangladesh, Bangladesh

Abstract


This study analyzes the impact of different types of dividend declaration, namely stock and cash dividends. Using event studymethod, MAAR and CAAR, this study found no evidence of abnormal returns on the declaration day for either of the types of dividends. However, significant negative returns are reported on days prior to the declaration day for stock dividend, indicating speculative nature of the investors. Furthermore, it provides positive returns during the post-announcement period as the investors realize the chance of potential gains. However, as far as cash dividend is concerned companies listed under DSE do not provide any significant abnormal returns during the 60 days event window. For CAAR, no significant return is reported for cash dividend, while stock dividend provided a maximum 5.6% abnormal returns during the post announcement period.


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