Stock price reactions to dividend changes : evidence from the Johannesburg Stock Exchange

This research paper examines stock price reactions to the changes in cash dividend payments for mature companies listed on the Johannesburg Stock Exchange (JSE). Prior South African research studies have employed the Market Model and Mean-Adjusted Return Model of event study to estimate "normal return" of the companies listed on the JSE. This study has employed the Market-Adjusted Return Model and short event window (-5, +5) to test the effect of dividend changes. The empirical results are based on 48 samples of mature companies with regular half yearly cash dividend records during the 2000- 2004 period. Using 4741 dividend change observations, it was found that the stock price reactions to increase announcements were greater than those for decrease announcements over the entire event days. It was further found that the stronger positive market reactions were associated with those announcements of larger percentage increases in dividends. These results lead to support the existence of the Dividend Signalling Hypothesis.

Grantor dc:publisher.institution

Department of Finance and Tax

Year dc:date.issued

2006

Author dc:creator

• Mu, Lin

Advisor dc:contributor.advisor

• Smith, Colin

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/11427/11578

OAI identifier oai:identifier

oai:open.uct.ac.za:11427/11578