scholarly journals Corporate Announcements and Market Efficiency: A Case on Indian Capital Market

2021 ◽  
Vol 16 (8) ◽  
pp. 71
Author(s):  
Nagendra Marisetty ◽  
Pardhasaradhi Madasu
Keyword(s):  
Market Efficiency ◽  
Stock Prices ◽  
Abnormal Returns ◽  
Market Model ◽  
Test Results ◽  
Cash Dividend ◽  
Corporate Announcements ◽  
Stock Split ◽  
Dividend Announcements ◽  
Efficiency Test

Capital markets being the backbone of the economy, are expected to be functioning efficiently. Efficiently-priced financial markets are considered a catalyst for the economic growth of the nations (Malkiel, 2010). Efficient markets are the reflection of security valuations. In an informationally efficient market, no one can beat the market and make abnormal returns based on the information because the information is instantaneously observed in the stock prices. The current paper analyses the market efficiency of three of the most popular corporate events, i.e., announcement of cash dividends, bonus issues, and stock split in the Indian context. The sample is 2253 pure cash dividend announcements (627 large-caps, 552 mid-caps, and 1074 small-caps), 152 bonus issue announcements (49 large-caps, 33 mid-caps, and 70 small-caps), and 181 stock split announcements (35 large-caps, 34 mid-caps, and 112 small-caps) were used for this study. Event methodology market model used to calculate Average Abnormal Returns (AAR) and Cumulative Average Abnormal Returns (CAAR). The results of the study have few findings which are contradictory to the existing literature on market efficiency. The cash dividend announcements have shown evidence for market efficiency, and results are contrary to Gupta et al. (2012), but the results are similar to Mishra (2005). Bonus issue announcements also have shown evidence for a semi-strong form of efficiency, test results identical to Dhar and Chhaochharia (2008), Kumar and Mittal (2015). Stock split announcements have not shown market efficiency, and the effect is similar to the study of Lakshmi and Roy (2012) and contrary to Chavali and Zahid (2011). Our results also support the premise that the emerging countries depict evidence of market efficiency (Bechev, 2003). Finally, we conclude that market efficiency results differ based on corporate announcements and market capitalization.

scholarly journals Reaction of Stock Prices to Dividend Announcements and Market Efficiency in Pakistan

2010 ◽  
Vol 15 (1) ◽  
pp. 103-125 ◽  
Author(s):  
Muhammad Akbar ◽  
Humayun Habib Baig
Keyword(s):  
Market Efficiency ◽  
Stock Prices ◽  
Stock Exchange ◽  
Statistical Significance ◽  
Abnormal Returns ◽  
Market Model ◽  
Rank Test ◽  
Dividend Announcements ◽  
Signed Rank Test ◽  
Stock Dividend

This study tests the semi-strong form of market efficiency by investigating the reaction of stock prices to dividend announcements. It analyzes cash, stock, and simultaneous cash and stock dividend announcements of 79 companies listed on the Karachi Stock Exchange from July 2004 to June 2007. Abnormal returns from the market model are evaluated for statistical significance using the t-test and Wilcoxon Signed Rank Test. The findings suggest negligible abnormal returns for cash dividend announcements. However, the average abnormal and cumulative average abnormal returns for stock and simultaneous cash and stock dividend announcements are mostly positive and statistically significant.

scholarly journals Dividends Announcement and Semi Strong Form of Efficiency at The Nairobi Securities Exchange in Kenya

2020 ◽  
Vol 03 (10) ◽  
Author(s):  
Duncan Turere ◽  
◽  
Dr. Tobias Olweny ◽  
Keyword(s):  
Information Content ◽  
Stock Prices ◽  
Abnormal Returns ◽  
Strong Form ◽  
Market Model ◽  
Exchange Market ◽  
Market Prices ◽  
Insurance Sector ◽  
Dividend Announcements ◽  
Agricultural Banking

The objective of this study was to establish the effects of dividend announcement to current market prices at the Nairobi Securities Exchange, with four specific objectives; to determine the information content of dividend announcements, to determine the extent to which prices converge to new values after dividend announcements on a sector by sector basis, to establish the market reaction to announced information and also to establish whether investors can secure excess returns by acting on announced information. A 66 days event timeline was employed from 2005 to 2015 on daily closing stock prices. A sample of 179 dividend announcements from 22 listed companies in 8 sectors were drawn and analysed using an OLS Market Model. Findings of the research conclude that; dividend announcements do have an impact on stock prices for the Agricultural, Banking, Commercial, Construction, Manufacturing and Telecomm Sectors and not for the Energy Sector, Insurance Sector and the Nairobi Securities Exchange Market. It takes more than five days for prices to adjust to their correct values and this makes it possible for market players to profit from the inefficiency by earning abnormal returns. We conclude that the Nairobi Securities Exchange is not semi-strong form efficient.

scholarly journals Stocks Abnormal Returns and Rate of Dividend Announcements

2021 ◽  
Vol 16 (11) ◽  
pp. 33
Author(s):  
Nagendra Marisetty ◽  
M. Suresh Babu
Keyword(s):  
Stock Markets ◽  
Abnormal Returns ◽  
Market Model ◽  
Cash Dividend ◽  
Market Capitalization ◽  
Emerging Stock Markets ◽  
Dividend Announcements ◽  
Developed Stock Markets ◽  
Indian Stock Market ◽  
The Impact

The present research study examined the impact of different dividend rate announcements on stocks prices in the Indian stock market. Stocks selected from S&P BSE 500 index and study period from 2008 – 2017. The sample used for this study is 1755 pure cash dividend announcements (492 large-caps, 425 mid-caps, and 838 small-caps). Dividend rates are classified into six classifications to test the stocks' abnormal returns to different dividend classifications. Event methodology market model used to calculate Average Abnormal Returns (AAR) and Cumulative Average Abnormal Returns (CAAR). The results were observed twenty-one times based on market capitalization and dividend rate wise for a final dividend announcement. The results of the study are not the same for different dividend rate classifications and different market capitalizations. The study found positive abnormal returns on event day in most of the classifications, and it is similar to Litzenberger and Ramaswamy (1982), Asquith and Mullins Jr (1983), Grinblatt, Masulis and Titman (1984), Chen, Nieh, Da Chen, and Tang (2009) and many previous research results studied in major developed stock markets and emerging stock markets. Full sample and small-cap final dividend rate 100 percent to 199 percent average abnormal returns are positively significant, and other final dividend rate classification abnormal returns are positive in most of the observations, but returns are not significant. Large-cap average abnormal returns are more sensitive to different dividend rates, and small-cap reacts positively in all classifications. So, different market capitalization final dividend actions impact on stocks in India varies in different dividend rate classifications.

AN ANALYSIS OF ABNORMAL RETURNS ASSOCIATED WITH STOCK SPLIT

2021 ◽  
pp. 1-14
Author(s):  
JYOTI PANDEY ◽  
VINAY KANDPAL ◽  
NEERAJ NAUTIYAL
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Market Model ◽  
Stock Splits ◽  
Event Window ◽  
Stock Split ◽  
Secondary Information ◽  
The Impact

A stock split is when a company’s outstanding shares are divided into multiple shares by issuing more shares to current shareholders without eroding their stake’s value. The company typically takes these actions to increase liquidity and marketability, lower stock prices, attract new investors and so on. The purpose of this study is to examine the impact of stock splits on the stock returns during the study period. Companies listed on the Bombay Stock Exchange (BSE) and those included in the S&P BSE 500 Index are included in the stock split data. The study period covers 14 years, between 2008 and 2021. Market model event study methodology is being employed to analyze the average abnormal returns (AARs), cumulative abnormal returns (CARs) and cumulative AAR (CAARs) using an event window period consisting of 31 days ([Formula: see text]). The study is largely based on secondary information from the CMIE Prowess IQ Database and the official BSE website. The [Formula: see text]-test, mean and standard deviation were used to investigate the influence of stock split announcements on share prices and the performance of stock splits before and after the announcement. The study found that on ([Formula: see text]), ([Formula: see text]), ([Formula: see text]) and ([Formula: see text]) and on the day of the announcement ([Formula: see text]), the market reacted favorably with significant positive abnormal returns. On ([Formula: see text]) and ([Formula: see text]) days, however, there were significant negative abnormal returns. The null hypothesis is accepted as the CAR for the whole 31-day event window, which is 0.0221, with a [Formula: see text]-statistic of 1.692, which is insignificant.

Investigating beta anomaly: comparison of Shariah-compliant and conventional stocks

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Ali Jibran Qamar ◽  
Asma Hassan ◽  
Mian Sajid Nazir ◽  
Abdul Haque
Keyword(s):  
Comparative Analysis ◽  
Stock Market ◽  
Stock Return ◽  
Abnormal Returns ◽  
Good News ◽  
Market Model ◽  
Cash Dividend ◽  
Content Type ◽  
Dividend Announcements ◽  
The Impact

Purpose The purpose of this paper is to examine the impact of dividend announcements on the stock return of Shariah-compliant and conventional stocks. Design/methodology/approach An event study methodology is applied to study the beta anomaly. Market-adjusted return model, mean-adjusted return model and market model have been applied to calculate excess returns. Estimation period used in this study is 130 days, and event period consists of 21 days in total, i.e. starting from the day –10 “before the cash dividend announcement” to day +10 “after the cash dividend announcements. Findings It has been concluded from the results that dividend plays an informational role in the Pakistan Stock Exchange. As the investors in Pakistan react favorably to the dividend increase announcements and unfavorably to the dividend decrease announcements, they consider dividend increase announcement as good news and dividend decrease announcement as bad news. Practical implications The findings of this study have several implications for different participants of the stock market, such as investors, academicians, researchers, fund managers and policymakers. They can use this information to make decisions while making efficient portfolios. Investors may get abnormal returns by focusing on the dividend announcement patterns. This can influence the attitude of investors toward efficient investments in the stock market and ultimately contribute to the betterment of society. This study is also beneficial for academicians and researchers, as it provides a comparative analysis of Shariah-compliant and conventional stocks and the anomalous effect of dividend announcements on stock return. Originality/value Limited research in the world’s context and null is available in Pakistani context on the subject matter. The comparative analysis of “Shariah-compliant” and “conventional” stocks provides insight into the asset pricing of Shariah-compliant stocks that have not been explored earlier. This study also uses three different methods (mean model, market model and market-adjusted return models) to compare Shariah-compliant and conventional stocks

scholarly journals Stock Price Reactions on NASDAQ Stock Exchange for Special Dividend Announcements

2019 ◽  
Vol 3 (6) ◽  
pp. 382-388 ◽  
Author(s):  
Arian Seyedimany
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Market Model ◽  
Signalling Theory ◽  
Dividend Announcements ◽  
Price Reactions ◽  
Stock Price Reactions ◽  
Dividend Irrelevance

Announcing dividend pay-out policy by a company will signals market firm’s future prospects and changes its stock prices according to dividend signalling theory. By analysis the effect of special dividend announcements for 5 companies listed in NASDAQ for the period of 2014-2018, this study investigates the stock price reactions to special dividend announcement for 40 days around the event and challenges dividend signalling theory. The empirical results calculated both in discrete and logarithmic forms. Only few disordered significant abnormal returns and average abnormal returns occurred according to the t-test. The results show that shareholders do not gain value from announcement of special dividend in NASDAQ stock exchange market. That Results indicated from adjusted market model in this research do not support dividend-signalling theory Hence do not confirm that the announcement of dividend has significant effect on price of shares. In general the results consistent with the Miller and Modigliani (1961) dividend irrelevance hypothesis.

scholarly journals ANALISIS PERBEDAAN HARGA SAHAM, RETURN SAHAM, DAN ABNORMAL RETURN SEBELUM DAN SESUDAH STOCK SPLIT PADA PERUSAHAAN HIGH PROFILE DAN LOW PROFILE YANG TERDAFTAR DI BURSA EFEK INDONESIA

2021 ◽  
Vol 11 (1) ◽  
pp. 42
Author(s):  
Pita Rahmawati ◽  
Jawoto Nusantoro ◽  
Gustin Padwa Sari
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Abnormal Returns ◽  
T Test ◽  
Paired Sample ◽  
High Profile ◽  
Normality Test ◽  
Low Profile ◽  
Stock Split ◽  
Before And After

This research aims to determine whether there are differences in stock prices, stock returns and abnormal returns before and after a stock split in high profile and low profile companies. The research period used in this study was on 2016-2018. The research was analyzed in quantitative method by using a purposive sampling method. Based on the sampling criteria, 40 companies were selected as research samples. Kolmogorov Smirnov One Sample test was used for the normality test. After the normality test was carried out, the data was processed using the two paired-sample difference test. The t-test (paired sample t-test) was used if data were normally distributed but if it was not normally distributed the Wilcoxon Signed Rank test would be used. Hypothesis testing results showed that (1) there are differences in stock prices whether before and after a stock split in high profile companies (2) there are differences in stock prices whether before and after the stock split in low profile companies (3) there are differences in stock returns whether before and after a stock split in the company high profile (4) there is no difference in stock returns whether before and after the stock split in low profile companies (5) there is no difference in abnormal returns whether before and after the stock split in high profile companies (6) there is no difference in abnormal returns whether before and after the stock split in low profile companies (7) there are differences in stock prices after a stock split in high profile companies and low profile (8) there is no difference in stock returns whether before and after the stock split in high profile and low profile companies (9) there is no difference in abnormal stock returns whether before and after a stock split at high profile and low profile companies.

The effect of the imposition of a public reprimand on the stock price of companies in Malaysia

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Emie Famieza Zainudin ◽  
Hafiza Aishah Hashim ◽  
Shahnaz Ismail
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Design Methodology ◽  
Negative Impact ◽  
Abnormal Returns ◽  
Investment Decisions ◽  
Market Model ◽  
Market Reactions ◽  
Content Type ◽  
A Company

Purpose This paper aims to examine the effect of the imposition of public reprimands on the underlying stock prices of companies in Malaysia. Design/methodology/approach Data on 148 companies that received public reprimands during the period from 2007 to 2013 were collected from the Bursa Malaysia website to analyse the market reactions to the imposition of public reprimands. Findings Based on a market model of abnormal returns, the empirical result showed that the imposition of a public reprimand had a negative impact on a company’s stock price. Moreover, when a market model of average abnormal returns (AAR) was used, the result indicated that companies that had received a public reprimand had a negative AAR value. Research limitations/implications The findings from this study have implications for shareholders in making their investment decisions because they can switch their investments to other companies and markets after a company in which they are interested or have made an investment has received a public reprimand. Originality/value There is limited research on the imposition of public reprimands and the effect that it has on companies in developing countries. Hence, this study contributes to research in this area by providing evidence on the effect of public reprimand on stock price reactions in the context of a developing country, namely, Malaysia.

Stock market reaction to cash dividends: evidence from the Nigerian stock market

2019 ◽  
Vol 45 (3) ◽  
pp. 366-380
Author(s):  
Friday Kennedy Ozo ◽  
Thankom Gopinath Arun
Keyword(s):  
Stock Market ◽  
Event Study ◽  
Stock Price ◽  
Abnormal Returns ◽  
Cash Dividend ◽  
Content Type ◽  
Price Reaction ◽  
Stock Market Reaction ◽  
Dividend Announcements ◽  
Stock Price Reaction

PurposeVery little is known about the effect of dividend announcements on stock prices in Nigeria, despite the country’s unique institutional environment. The purpose of this paper is, therefore, to provide empirical evidence on this issue by investigating the stock price reaction to cash dividends by companies listed on the Nigerian Stock Exchange.Design/methodology/approachStandard event study methodology, using the market model, is employed to determine the abnormal returns surrounding the cash dividend announcement date. Abnormal returns are also calculated employing the market-adjusted return model as a robustness check and to test the sensitivity of the results toβestimation. The authors also examine the interaction between cash dividends and earnings by estimating a regression model where announcement abnormal returns are a function of both dividend changes and earnings changes relative to stock price.FindingsThe study find support for the signaling hypothesis: dividend increases are associated with positive stock price reaction, while dividend decreases are associated with negative stock price reaction. Companies that do not change their dividends experience insignificant positive abnormal returns. The results also suggest that both dividends and earnings are informative, but dividends contain information beyond that contained in earnings.Research limitations/implicationsThe sample for the study includes only cash dividend announcements occurring without other corporate events (such as interim dividends, stock splits, stock dividends, and mergers and acquisitions) during the event study period. The small firm-year observations may limit the validity of generalizations from these conclusions.Practical implicationsThe findings are useful to researchers, practitioners and investors interested in companies listed on the Nigerian stock market for their proper strategic decision making. In particular, the results can be used to encourage transparency and good governance practices in the Nigerian stock market.Originality/valueThis paper adds to the very limited research on the stock market reaction to cash dividend announcements in Nigeria; it is the first of its kind employing a unique cash dividends data.

EFFECT OF BONUS ISSUE ON STOCK PRICES OF COMPANIES QUOTED AT THE NAIROBI SECURITIES EXCHANGE

2017 ◽  
Vol 2 (1) ◽  
pp. 1
Author(s):  
Patrick Maina Gachuhi ◽  
Cyrus Iraya
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Abnormal Returns ◽  
Secondary Data ◽  
Market Model ◽  
Expected Returns ◽  
Policy Makers ◽  
Study Methodology ◽  
The Difference ◽  
Event Study Methodology

Purpose: The purpose of this study was to determine the effect of bonus issue on stock prices of companies quoted at the Nairobi securities exchangeMethodology: The study adopted an event study methodology since the study was concerned with the establishment of the information content of bonus issue announcement on share performance at the NSE. The population of this study was 61 companies listed in the NSE. A sample size of 10 listed companies was focused on as there were only 10 companies which had issued bonuses between 2009 and 2012. The study used secondary data to gather information. The collected secondary data was coded and entered into Statistical Package for Social Sciences (SPSS, Version 20) for analysisResults: The study findings revealed that there was a drastic incline from year 2009 to year 2010 followed by a slight decrease in abnormal returns in the following years, Abnormal returns present the difference between the actual returns and the expected returns over a certain period of time. Study findings from the market model indicated that the market return is a good predictor of stock returns.  ANOVA results indicated that abnormal returns after bonus issue were significantly higher than abnormal returns before bonus issue. ANOVA results also indicated that actual stock returns were significantly higher after bonus issue than before the bonus issuePolicy recommendation: The study recommends the NSE to establish and enhance policies for investing so as to attract and encourage large institutional and foreign investors to participate at the NSE. The study also recommends that policy makers and regulators at the NSE are encouraged to encourage more research on the NSE form of efficiency; this will provide a forum for investors to get the information on the form of efficiency of the market and boost their confidence when investing at the NSE

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