An empirical study of dividend effect through two fold impact on share price

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There is abundant study available which studied impact of dividend announcement on share price but this paper is modeled in different manner as dividend announcement is not one time process but any company takes several procedural checks to ensure announcement of dividend from conception to declaration and declaration to distribution which is segregated into two-fold study in the present paper.

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International Journal of Management (IJM) Volume 9, Issue 2, March–April 2018, pp. 64–74, Article ID: IJM_09_02_007 Available online at http://www.iaeme.com/ijm/issues.asp?JType=IJM&VType=9&IType=2 Journal Impact Factor (2016): 8.1920 (Calculated by GISI) www.jifactor.com ISSN Print: 0976-6502 and ISSN Online: 0976-6510 © IAEME Publication AN EMPIRICAL STUDY OF DIVIDEND EFFECT THROUGH TWO FOLD IMPACT ON SHARE PRICE Dr. A. Shanker Prakash Assistant Professor, Amity Business School, Amity University Gwalior, Madhya Pradesh ABSTRACT There is abundant study available which studied impact of dividend announcement on share price but this paper is modeled in different manner as dividend announcement is not one time process but any company takes several procedural checks to ensure announcement of dividend from conception to declaration and declaration to distribution which is segregated into two-fold study in the present paper. The ASRV and CAAR tests applied on five sample companies which declared final dividend during 2017. The conclusion suggested that dividend announcement is regular practice of any company which could not change the leading trend & fashion to market. Key words: Two-Fold Study, Dividend Effect, ASRV, CAAR, Final Dividend. Cite this Article: Dr. A. Shanker Prakash, An Empirical Study of Dividend Effect Through Two Fold Impact On Share Price, International Journal of Management, 9 (2), 2018, pp. 64–74. http://www.iaeme.com/IJM/issues.asp?JType=IJM&VType=9&IType=2 1. INTRODUCTION Observing the stock price movement is an area of research that had pulled the attention of various academicians and scholars time to time. Many economic and non-economic factors affect the movement of the share price which incorporation is studied through event-study analysis. A company's liquidity in the present market can be determined by the dividend announcements made by the company. One of the most meaningful events for research is dividend announcements. In simple terms dividend is the cost of equity capital to equity shareholders. Dividend policy has been an issue of interest in financial literature since Joint Stock Companies came into existence. Where one thought of dividend policy advocates the impact of dividend announcement on the share price and other thought refutes the previous. There is an incongruity which becomes evident at this juncture. The incongruity is that dividend announcements and payment are considered good news, held and hailed as such by investors and most analyst, whereas dividend cuts and reductions are considered bad news http://www.iaeme.com/IJM/index.asp 64 editor@iaeme.com
Dr. A. Shanker Prakash suggesting impending financial doom. This incongruity is commonly referred to as “Dividend puzzle”. Dividend announcements, whether a surprise or an increase to an already existing dividend, are one of the most common actions firms take in order to attract new investors. These announcements by firms are usually seen as a sign of strength, suggesting that the firm has a substantial amount of excess capital. The present study provides an empirical evidence of the market's reaction to dividend announcements. It provides an opportunity to understand the markets' assessment of dividend payments, thus facilitating a better understanding of the dividend policies on few selected Indian companies. The study will investigate the existence of a relationship between a company’s dividends and the market performance of its stock on the National Stock Exchange. The present study is not only focused on existence of a relationship between a company’s dividends and the market performance of its stock but tried to attempt the study on two fold basis which accommodates the impact on the basis of period prior to dividend declaration date which can be considered as screening period of dividend announcement, the central is the mean time of dividend declaration time to the date of record which is referred in this paper as mean period and ultimately, the second fold is the consequence period which opens doorway for new investors. Further, for conducting the above study this paper has relied on Average Security Returns Variability Test or ASRV test which test is most powerful for representing quick time reaction the declaration of dividend to distribute them as per record date. To accomplish this objective, the paper is divided into sections. The next section of the paper reviews the literature so far published on areas related to the one under review, followed by the one describes the testable the data and the methodology used. The last section presents the results and the analysis of the findings, and finally, there is a summary and conclusion section. 2. LITERATURE REVIEW There is abundant literature that has examined market reaction to dividend announcements. And majority of the studies have concluded the presence of a positive association between announced changes in dividend policy and stock price movements. Neetu & Shuchi (2010) found that Investors do not gain significant value in the period preceding as well as on the dividend announcement day, yet they can gain value in the post announcement period. The evidence nevertheless shows that dividend increases lead more positive abnormal returns, supporting the Efficient Market Hypothesis. The results of study conducted by Sultan & Kumari indicate that Average Abnormal Returns are not found significant on event day during any period of dividend announcements. The results of paired t-test for means have shown that there are significant differences in average number of transactions before and after announcement from 2006 to 2010. On the other hand, the results of the paired t-test for means have shown mixed results for turnover and average traded quantity during the period under study. Bitok, et al, (2011) concluded in another study that daily price movements in the NSE are significantly related to investor sentiment and that investors’ psychology is a potential explanation for stock price movements. This indicates that the reaction of stockholders plays a vital role in influencing the stock price. The stockholder therefore is considered to be the greatest influence on stock price through their reaction to dividend announcements and expectations. Majanga Byson (2015) paper aims at establishing if there exists such a direct relationship between a firm’s dividends and its stock price with particular emphasis on the Malawi stock exchange. The findings of this study reveal that there is a significant positive relationship between dividends and stock price as touted by the dividend valuation models of determining stock prices. http://www.iaeme.com/IJM/index.asp 65 editor@iaeme.com
An Empirical Study of Dividend Effect Through Two Fold Impact On Share Price Anjali, Guntur (2016) paper finds that despite of investors do not gain significant value in the period preceding as well as on the dividend announcement day, yet they can gain value in the post announcement period. Investors do shift their security positions at the time of dividend announcement, which indicate that in post announcement period there is a possibility of information content in dividend announcement in BSE. Yet in an another study Joshi & Mayur (2017) examined the share price reactions of top 20 PSU (Public sector units) companies by market capitalization listed in Bombay Stock Exchange (BSE), surrounding 20 days of announcement (-10 days to +10 days) during the year 2013-2016, where they found a significant difference in the impact of dividend announcements in pre and post announcement period on the share prices of the selected companies. 3. METHODOLOGY In this paper two fold and multi-stage approach is used to test the stock price responses to dividend announcement. The two-fold study describes the study is distributed in the three- phase manner which reflects the window period based on the notion that accommodates the impact on the basis of period prior to dividend declaration date which can be considered as screening period of dividend announcement, the central portion is the mean time of dividend declaration time to the date of record which is referred in this paper as mean period and ultimately, the second fold is the consequence period which opens doorway for new investors. Here forth, we refer these periods as SP, MP and CP for simplifying our examination. Further, for ease of our testing the whole-process is developed through two- stage exercise. The first stage consists of estimation of parameter like beta based on the ex- post returns on stocks and market index, and expected returns on each of the stocks based on the market model. In the second stage these estimated parameters are used to calculate the stock returns variability. Finally, the third stage is developed to examine the average stock return variability across all sample firms used in this study. The purpose of this study is to explain how the dividend announcement is discounted in share price in two-fold manner. For examining we have relied upon and extracted the data in two levels; first of all, randomly, selected final dividend announcement of five companies from the most reliable website of moneycontrol.com and then picked up the daily share price movement data from the website of National Stock Exchange of India for the target companies. Further, the data is collected for the period of twelve months i.e. 1st April 2017 to 31st March 31, 2018. Hypothesis To achieve the above stated objectives, the following hypotheses have been formulated for the proposed study: H0 – There is no significant difference of Screening Period, Mean Period and Consequence Period of dividend announcement on stock price returns. H1: There is significant difference of Screening Period, Mean Period and Consequence Period of dividend announcement on stock price returns. Table 1 clearly shows the five companies along with their NSE Symbol, final dividend declaration date and ex-dividend date. http://www.iaeme.com/IJM/index.asp 66 editor@iaeme.com
Dr. A. Shanker Prakash Table 1 Sample Companies with Dividend Announcement Dates Serial Name of Company NSE Symbol Final Dividend Ex-dividend No. Declaration Date Date 1 Accelya Kale Solutions ACCELYA 09th Aug, 2017 28th Sept, 2017 2 Bhageria Industries Limited BHAGERIA 12th May, 2017 24th Nov, 2017 3 CMI Limited CMICABLES 04th July, 2017 21st Dec, 2017 4 Gillette India Limited GILLETTE 30 Aug, 2017 06th Nov,2017 5 Surya Roshni Ltd SURYAROSHNI 01st June, 2017 08th Dec, 2017 The daily returns have been calculated for both individual securities as well as respective market index using the following equation: Pi , − Pi , t −1 I m, t − I m, t −1 Ri,t = t Rm,t = Pi , t −1 I m , t −1 Where, Ri,t = Return on Security i on day t Pi,t= Closing Price of the security on day t of company i Pi,t-1 =Opening Price of the security on day t of company i. Where Im,t is the value of respective index at time t. Table 2 represents Respective market index for the sample companies. Table 2 Sample Companies with Constituent NSE Index Name Serial Constituent NSE Name of Company NSE Symbol No. Index 1 Accelya Kale Solutions ACCELYA NIFTY IT 2 Bhageria Industries Limited BHAGERIA NIFTY 500 3 CMI Limited CMICABLES NIFTY 500 4 Gillette India Limited GILLETTE NIFTY FMCG 5 Surya Roshni Ltd SURYAROSHNI NIFTY METAL For the statistical models, the assumption that returns are jointly multivariate normal and independent and identically distributed through time is imposed. This distributional assumption is sufficient for the constant mean return model and market model has to be correctly specified. Different models are used for computing expected returns. Despite of all those models, the famous model is market model which is widely used by researchers. In this study, we have used the market model assuming that security returns are a linear function of the general market movement to manifest expected return on a stock as given in the following equation: Ri,t = αi + βiRmt + εit Where, Ri,t = observed daily return for the security “i” on day “t” αi = intercept for the security “i” βi = beta factor for the security “i” Rmt = observed daily return for the market index “m” on day “t”. εit ~ iid (0, σ2 ) Thus, the model hypothesizes a stochastic process that generates security returns. It separates the stochastic portion of a security return into two components, a systematic component (βiRmt) and a nonsystematic or individualistic component (εit). The systematic component measures the impact of macro event, the variability in general market movement and the individualistic component (also called error term) measures the impact of micro event on the rate of return of individual security. Thus, the error term is a firm specific component. http://www.iaeme.com/IJM/index.asp 67 editor@iaeme.com
An Empirical Study of Dividend Effect Through Two Fold Impact On Share Price In testing the semi-strong form of market efficiency, the concern is whether all the publicly available information regarding a security is “fully reflected” in its share price so rapidly that there is no possibility to earn abnormal returns by using it. More formally, testing the semi - strong form of efficiency implies testing a martingale model in the following form: E (ARj,t+1│φ) = 0 Where ARj,t+1 is the abnormal return produced by security “j” at time “t+1” and φ is the information set available at “t”, i.e. the date of announcement of the information for the company. Abnormal Return = Actual Return – Expected Return The abnormal returns of the company have been calculated by getting the difference of actual returns over expected returns. The abnormal returns of individual security are then used to examine the result of two powerful financial tools to arrive at any conclusion. At first reaction in the security prices to the announcement of dividend with the help of Security Returns Variability (SRV) model. SRV model can be calculated as the square of abnormal returns to the variance of abnormal returns of window period. Further, SRV for the whole window period were averaged to yield the Average Security Returns Variability (ASRV). Again, the significance of reaction in ASRV is applied using t-statistics on the value of (ASRV-1). Further, we cumulated all the available average abnormal returns (AAR) for their respective lags known as Cumulative Average Abnormal Returns (CAAR). The significance of CAAR is tested through t -statistics. To console the study of above objectives, we framed two set of hypothesis and tested the sample companies. Set-I. For testing Average Security Returns Variability (ASRV), null and alternative hypothesis are as follows: H0: Security prices do not react to Dividend announcement i.e. ASRV = 1. H1: Security prices react apparently to Dividend announcement report i.e. ASRV >1. Set-II. For testing Cumulative Average Abnormal Returns (CAAR), null and alternative hypothesis are as follows: H0: There is no reaction and hence the abnormal returns are zero. To aver, CAAR=0. H1: There is either positive or negative reaction to the announcement of Dividend. To aver, CAAR ≠ 0. Table 3 Abnormal Return and CAR of Three Periods of Accelya Kale Solutions SP AR CAR MP AR CAR CP AR CAR SP-01 0.260838 0.260838 MP-01 2.942789 2.942789 CP-01 -1.91878 -1.91878 SP-02 0.633858 0.894696 MP-02 -0.64822 2.294573 CP-02 -0.71039 -2.62917 SP-03 0.484229 1.378925 MP-03 0.07607 2.370642 CP-03 -1.74124 -4.37041 SP-04 -0.10079 1.27814 MP-04 -1.63594 0.734701 CP-04 2.94029 -1.43012 SP-05 1.763693 3.041832 MP-05 1.190389 1.925091 CP-05 1.569221 0.139102 SP-06 -0.96501 2.076819 MP-06 2.196492 4.121582 CP-06 -0.5733 -0.43419 SP-07 -2.33211 -0.25529 MP-07 1.891186 6.012768 CP-07 -0.92309 -1.35728 SP-08 2.081717 1.82643 MP-08 -0.41541 5.597362 CP-08 1.895145 0.537861 SP-09 0.537844 2.364274 MP-09 -0.0566 5.540757 CP-09 -4.09318 -3.55531 SP-10 0.705606 3.06988 MP-10 -2.33427 3.206489 CP-10 0.185977 -3.36934 SP-11 0.920461 3.99034 MP-11 -0.21447 2.992022 CP-11 0.881639 -2.4877 SP-12 1.907934 5.898274 MP-12 2.321292 5.313314 CP-12 -0.85474 -3.34244 http://www.iaeme.com/IJM/index.asp 68 editor@iaeme.com
Dr. A. Shanker Prakash SP AR CAR MP AR CAR CP AR CAR SP-13 -0.76846 5.129817 MP-13 -0.20694 5.106376 CP-13 -1.26789 -4.61033 SP-14 0.15021 5.280026 MP-14 1.053094 6.159469 CP-14 -0.87617 -5.48649 SP-15 -0.03772 5.24231 MP-15 0.098606 6.258075 CP-15 1.080946 -4.40555 SP-16 0.728553 5.970862 MP-16 0.576945 6.83502 CP-16 -0.34471 -4.75026 SP-17 4.402475 10.37334 MP-17 -0.76934 6.065676 CP-17 -0.59411 -5.34437 SP-18 -2.36203 8.011309 MP-18 0.632732 6.698408 CP-18 0.20821 -5.13616 SP-19 -1.24105 6.770259 MP-19 0.960032 7.65844 CP-19 -0.19699 -5.33315 SP-20 0.745066 7.515325 MP-20 -0.5839 7.07454 CP-20 -1.28525 -6.6184 SP-21 0.843942 8.359267 MP-21 0.005508 7.080048 CP-21 -1.14296 -7.76135 SP-22 -0.98817 7.371095 MP-22 -1.37496 5.705092 CP-22 -1.89669 -9.65805 SP-23 1.601597 8.972692 MP-23 -1.30161 4.403486 CP-23 1.012076 -8.64597 SP-24 0.622318 9.59501 MP-24 0.37144 4.774926 CP-24 -3.49441 -12.1404 SP-25 -1.31504 8.279972 MP-25 -0.60846 4.166464 CP-25 0.204845 -11.9355 SP-26 0.125471 8.405443 MP-26 1.202814 5.369278 CP-26 -1.21755 -13.1531 SP-27 -1.8811 6.524341 MP-27 4.220966 9.590244 CP-27 0.572115 -12.581 SP-28 1.024692 7.549033 MP-28 2.066855 11.6571 CP-28 -1.35147 -13.9324 SP-29 -0.25091 7.29812 MP-29 -0.70745 10.94965 CP-29 -0.84509 -14.7775 SP-30 -1.31686 5.981261 MP-30 -0.68195 10.26771 CP-30 0.617852 -14.1597 Table 4 Abnormal Return and CAR of Three Periods of Bhageria Industries Limited SP AR CAR MP AR CAR CP AR CAR SP-01 -0.70575 -0.705747 MP-01 -3.56651 -3.56651 CP-01 -0.6652 -0.6652 SP-02 -2.03604 -2.741791 MP-02 -2.69002 -6.25653 CP-02 1.23064 0.565438 SP-03 -0.2128 -2.954587 MP-03 -1.05947 -7.31599 CP-03 1.33031 1.89575 SP-04 1.534768 -1.419819 MP-04 -2.21665 -9.53264 CP-04 -2.4453 -0.54958 SP-05 0.858609 -0.561211 MP-05 -1.02209 -10.5547 CP-05 0.06128 -0.4883 SP-06 0.639127 0.077916 MP-06 -3.06565 -13.6204 CP-06 -2.7053 -3.19362 SP-07 2.832322 2.910238 MP-07 -0.8524 -14.4728 CP-07 0.54529 -2.64833 SP-08 -2.42586 0.484383 MP-08 -3.24842 -17.7212 CP-08 -1.7149 -4.36322 SP-09 -0.37668 0.107704 MP-09 -1.74282 -19.464 CP-09 -1.5299 -5.89309 SP-10 -0.73796 -0.63026 MP-10 -0.03532 -19.4993 CP-10 -1.2662 -7.15925 SP-11 -2.24819 -2.878445 MP-11 0.501496 -18.9978 CP-11 -1.4028 -8.56205 SP-12 -1.06465 -3.943091 MP-12 -0.06972 -19.0676 CP-12 -1.6623 -10.2244 SP-13 0.341335 -3.601756 MP-13 0.24064 -18.8269 CP-13 -0.4866 -10.711 SP-14 -0.77384 -4.375598 MP-14 -1.33865 -20.1656 CP-14 2.22822 -8.48275 SP-15 -0.54614 -4.921739 MP-15 -2.53345 -22.699 CP-15 2.7984 -5.68436 SP-16 -0.14776 -5.069497 MP-16 -0.05543 -22.7544 CP-16 0.58074 -5.10362 SP-17 0.717178 -4.352319 MP-17 -0.75114 -23.5056 CP-17 -0.7898 -5.8934 SP-18 -3.10015 -7.452467 MP-18 -1.63706 -25.1426 CP-18 -1.2909 -7.1843 SP-19 1.248818 -6.203648 MP-19 1.329852 -23.8128 CP-19 -0.2189 -7.40316 SP-20 -2.10484 -8.308485 MP-20 8.337119 -15.4757 CP-20 -2.065 -9.46814 SP-21 -0.32757 -8.636058 MP-21 -0.35093 -15.8266 CP-21 -0.4667 -9.93488 SP-22 0.335413 -8.300644 MP-22 -1.95981 -17.7864 CP-22 -0.9455 -10.8804 http://www.iaeme.com/IJM/index.asp 69 editor@iaeme.com
An Empirical Study of Dividend Effect Through Two Fold Impact On Share Price SP AR CAR MP AR CAR CP AR CAR SP-23 -1.72168 -10.02232 MP-23 2.139228 -15.6472 CP-23 -0.5244 -11.4048 SP-24 2.527736 -7.494587 MP-24 -3.60416 -19.2514 CP-24 -2.1424 -13.5472 SP-25 3.61949 -3.875097 MP-25 2.732288 -16.5191 CP-25 -0.8266 -14.3737 SP-26 -0.45005 -4.325149 MP-26 -0.6829 -17.202 CP-26 8.90212 -5.4716 SP-27 -0.39286 -4.718009 MP-27 -0.92031 -18.1223 CP-27 3.76102 -1.71059 SP-28 1.906088 -2.811921 MP-28 2.080186 -16.0421 CP-28 -0.4673 -2.17789 SP-29 -1.02216 -3.834079 MP-29 1.657088 -14.385 CP-29 -1.7644 -3.94232 SP-30 -2.71831 -6.552384 MP-30 -0.49388 -14.8789 CP-30 -1.721 -5.66331 Table 5 Abnormal Return and CAR of Three Periods of CMI Limited SP AR CAR MP AR CAR CP AR CAR SP-01 -1.26813 -1.2681 MP-01 -0.6844 -0.6844 CP-01 -3.1739 -3.1739 SP-02 -1.33156 -2.5997 MP-02 -2.15703 -2.8414 CP-02 0.30356 -2.8703 SP-03 -0.92657 -3.5263 MP-03 0.07895 -2.7624 CP-03 1.78409 -1.0862 SP-04 -1.68233 -5.2086 MP-04 2.26427 -0.4982 CP-04 8.05376 6.96751 SP-05 -0.08259 -5.2912 MP-05 -1.7613 -2.2595 CP-05 -3.4583 3.50925 SP-06 1.257487 -4.0337 MP-06 -2.12274 -4.3822 CP-06 0.43294 3.94219 SP-07 -0.70339 -4.7371 MP-07 -0.59896 -4.9812 CP-07 -0.2358 3.70642 SP-08 -0.49793 -5.235 MP-08 -0.64035 -5.6215 CP-08 -1.9662 1.74021 SP-09 -0.98878 -6.2238 MP-09 0.1794 -5.4421 CP-09 -2.7321 -0.9919 SP-10 -3.44351 -9.6673 MP-10 -0.98576 -6.4279 CP-10 -1.1007 -2.0925 SP-11 -2.85984 -12.527 MP-11 -0.39585 -6.8237 CP-11 1.63309 -0.4595 SP-12 2.108724 -10.418 MP-12 0.59934 -6.2244 CP-12 -2.0588 -2.5182 SP-13 2.446953 -7.9714 MP-13 -2.50621 -8.7306 CP-13 2.71528 0.19704 SP-14 0.804714 -7.1667 MP-14 -0.9943 -9.7249 CP-14 2.40484 2.60188 SP-15 -2.42103 -9.5878 MP-15 0.32672 -9.3982 CP-15 -2.9941 -0.3923 SP-16 -0.18916 -9.7769 MP-16 0.11744 -9.2807 CP-16 -0.262 -0.6543 SP-17 -0.06234 -9.8393 MP-17 -0.86405 -10.144 CP-17 -2.9089 -3.5632 SP-18 -1.36634 -11.206 MP-18 -0.20979 -10.354 CP-18 -1.8461 -5.4093 SP-19 0.531291 -10.674 MP-19 -0.00712 -10.361 CP-19 -1.855 -7.2644 SP-20 -0.78317 -11.457 MP-20 -0.64507 -11.006 CP-20 -1.1176 -8.382 SP-21 1.653897 -9.8036 MP-21 0.45351 -10.553 CP-21 -2.8291 -11.211 SP-22 -0.19316 -9.9967 MP-22 0.41671 -10.136 CP-22 0.01229 -11.199 SP-23 3.841153 -6.1556 MP-23 0.47085 -9.6657 CP-23 0.38474 -10.814 SP-24 7.115412 0.95982 MP-24 2.53574 -7.1300 CP-24 -1.4801 -12.294 SP-25 -0.88609 0.07373 MP-25 3.00268 -4.1273 CP-25 0.79723 -11.497 SP-26 1.381814 1.45554 MP-26 -1.68287 -5.8102 CP-26 0.05774 -11.439 SP-27 0.814206 2.26975 MP-27 -2.11 -7.9202 CP-27 -0.6657 -12.105 SP-28 4.305029 6.57478 MP-28 0.54604 -7.3741 CP-28 5.44454 -6.6604 SP-29 -5.93966 0.63512 MP-29 -2.26183 -9.6359 CP-29 -5.2311 -11.891 SP-30 -1.77409 -1.139 MP-30 -3.76343 -13.399 CP-30 -3.2852 -15.177 http://www.iaeme.com/IJM/index.asp 70 editor@iaeme.com
Dr. A. Shanker Prakash Table 6 Abnormal Return and CAR of Three Periods of Gillette India Limited SP AR CAR MP AR CAR CP AR CAR SP-01 -0.71288 -0.71288 MP-01 1.154154 1.154154 CP-01 -0.6027 -0.6027 SP-02 0.151684 -0.5612 MP-02 1.718736 2.87289 CP-02 1.05535 0.452654 SP-03 -0.26093 -0.82213 MP-03 -0.49198 2.380909 CP-03 -1.83071 -1.37805 SP-04 0.003807 -0.81833 MP-04 -0.68621 1.694698 CP-04 0.182203 -1.19585 SP-05 1.788994 0.970669 MP-05 1.374672 3.06937 CP-05 -0.87235 -2.0682 SP-06 -1.10101 -0.13034 MP-06 0.879655 3.949025 CP-06 0.729944 -1.33825 SP-07 -0.32637 -0.45672 MP-07 1.090835 5.03986 CP-07 0.764762 -0.57349 SP-08 -0.35011 -0.80682 MP-08 -0.88254 4.157317 CP-08 0.512667 -0.06082 SP-09 1.053487 0.246664 MP-09 -0.80226 3.355056 CP-09 1.392468 1.331644 SP-10 -0.95183 -0.70516 MP-10 -0.39895 2.956107 CP-10 2.149183 3.480828 SP-11 -0.50273 -1.2079 MP-11 -0.16001 2.796095 CP-11 0.528711 4.009538 SP-12 -0.83203 -2.03992 MP-12 -0.0131 2.782993 CP-12 -1.7701 2.239443 SP-13 -1.19063 -3.23055 MP-13 1.166165 3.949158 CP-13 0.419205 2.658648 SP-14 0.988042 -2.24251 MP-14 -0.33841 3.610747 CP-14 0.488243 3.14689 SP-15 0.918174 -1.32433 MP-15 0.443517 4.054264 CP-15 0.971779 4.118669 SP-16 1.628315 0.303984 MP-16 -0.93033 3.123938 CP-16 -0.51623 3.602434 SP-17 -0.49967 -0.19568 MP-17 0.071937 3.195875 CP-17 2.518781 6.121215 SP-18 -0.48502 -0.6807 MP-18 -0.62425 2.571621 CP-18 1.710186 7.831402 SP-19 -1.6135 -2.29419 MP-19 0.758375 3.329997 CP-19 0.11065 7.942052 SP-20 1.405365 -0.88883 MP-20 0.432421 3.762417 CP-20 -1.61737 6.324681 SP-21 1.230992 0.342164 MP-21 0.922672 4.685089 CP-21 3.103954 9.428636 SP-22 -1.03981 -0.69765 MP-22 1.102695 5.787784 CP-22 0.13993 9.568566 SP-23 -0.1458 -0.84345 MP-23 1.037936 6.82572 CP-23 0.117901 9.686467 SP-24 0.656789 -0.18666 MP-24 -0.00369 6.82203 CP-24 -1.53089 8.155578 SP-25 -0.67856 -0.86522 MP-25 1.276595 8.098625 CP-25 -2.71624 5.43934 SP-26 -0.32963 -1.19486 MP-26 -0.3722 7.726422 CP-26 -1.43896 4.000377 SP-27 -0.81402 -2.00888 MP-27 -0.34567 7.380751 CP-27 2.415672 6.416049 SP-28 -0.3438 -2.35268 MP-28 1.10034 8.481092 CP-28 -2.77532 3.640733 SP-29 -0.18559 -2.53827 MP-29 0.617508 9.0986 CP-29 1.063525 4.704258 SP-30 1.389674 -1.1486 MP-30 -1.06989 8.028706 CP-30 -1.41742 3.286839 Table 7 Abnormal Return and CAR of Three Periods of Surya Roshni Ltd SP AR CAR MP AR CAR CP AR CAR SP-01 2.248936 2.248936 MP-01 1.130656 1.130656 CP-01 -1.62059 -1.62059 SP-02 -1.03178 1.217155 MP-02 0.060325 1.190981 CP-02 -1.29327 -2.91386 SP-03 -1.57146 -0.35431 MP-03 0.635301 1.826282 CP-03 -2.33255 -5.24641 SP-04 -0.81855 -1.17286 MP-04 -2.46105 -0.63476 CP-04 0.26038 -4.98603 SP-05 -0.64816 -1.82102 MP-05 1.731081 1.096317 CP-05 -0.49776 -5.48378 SP-06 5.388858 3.56784 MP-06 0.549386 1.645703 CP-06 -0.90734 -6.39113 SP-07 15.28532 18.85316 MP-07 -2.96027 -1.31456 CP-07 -1.51704 -7.90817 SP-08 1.32738 20.18054 MP-08 -0.98093 -2.29549 CP-08 0.687621 -7.22054 SP-09 0.704583 20.88513 MP-09 0.245634 -2.04986 CP-09 -1.14603 -8.36658 http://www.iaeme.com/IJM/index.asp 71 editor@iaeme.com
An Empirical Study of Dividend Effect Through Two Fold Impact On Share Price SP AR CAR MP AR CAR CP AR CAR SP-10 4.157981 25.04311 MP-10 -0.55635 -2.60621 CP-10 0.048966 -8.31761 SP-11 6.194346 31.23745 MP-11 1.042784 -1.56342 CP-11 -0.42179 -8.73941 SP-12 -0.69782 30.53963 MP-12 -1.42046 -2.98388 CP-12 -0.53193 -9.27133 SP-13 0.744084 31.28372 MP-13 -0.68067 -3.66455 CP-13 -1.51368 -10.785 SP-14 -3.15373 28.12999 MP-14 0.454069 -3.21048 CP-14 -3.10464 -13.8897 SP-15 0.989377 29.11936 MP-15 3.280699 0.07022 CP-15 -1.46288 -15.3525 SP-16 -2.03896 27.0804 MP-16 -1.08662 -1.0164 CP-16 2.599682 -12.7529 SP-17 -1.76962 25.31078 MP-17 -3.21435 -4.23075 CP-17 2.548749 -10.2041 SP-18 -1.63178 23.679 MP-18 -0.91414 -5.14488 CP-18 5.209925 -4.99418 SP-19 5.17058 28.84958 MP-19 -2.07184 -7.21672 CP-19 -2.00108 -6.99525 SP-20 -0.93177 27.91781 MP-20 -1.32865 -8.54537 CP-20 -1.46426 -8.45951 SP-21 0.023304 27.94112 MP-21 -0.19796 -8.74333 CP-21 3.320115 -5.1394 SP-22 -0.63345 27.30767 MP-22 -0.81915 -9.56248 CP-22 3.600398 -1.539 SP-23 -0.76429 26.54338 MP-23 0.081726 -9.48075 CP-23 -0.36568 -1.90468 SP-24 -2.9146 23.62877 MP-24 1.704788 -7.77597 CP-24 0.384786 -1.51989 SP-25 0.934134 24.56291 MP-25 -3.25499 -11.031 CP-25 -0.9636 -2.48349 SP-26 -0.91946 23.64344 MP-26 -0.28941 -11.3204 CP-26 -0.15663 -2.64012 SP-27 -0.8337 22.80975 MP-27 -1.03636 -12.3567 CP-27 0.771786 -1.86833 SP-28 -3.28534 19.5244 MP-28 -0.5031 -12.8598 CP-28 2.534526 0.666194 SP-29 6.165595 25.69 MP-29 -1.04238 -13.9022 CP-29 -3.1992 -2.53301 SP-30 1.837067 27.52707 MP-30 -0.37658 -14.2788 CP-30 -2.30997 -4.84297 The above perusal of Table 3, 4, 5, 6, and 7 clearly depicts the abnormal return and cumulative abnormal return of five sample companies, where thirty days returns are represented in the form of -01 to -30 for three respective periods. Table 8 Outcome of ASRV Interpretation ASRV T-Test P-Value Accelya Kale Solutions 0.986014 -0.04302 0.966 Bhageria Industries Limit. 0.984005 -0.07089 0.944 SP CMI Limited 0.966901 -0.09955 0.921 Gillette India Limited 0.968336 -0.17315 0.864 Surya Roshni Ltd 1.024992 0.046147 0.964 Accelya Kale Solutions 0.843237 -0.6045 0.550 Bhageria Industries Limit. 0.881519 -0.33241 0.742 MP CMI Limited 0.510574* -3.73492 0.001 Gillette India Limited 1.019684 0.113091 0.911 Surya Roshni Ltd 0.442486* -4.81593 0.000 Accelya Kale Solutions 1.068607 0.217267 0.830 Bhageria Industries Limit. 0.973369 -0.05415 0.957 CP CMI Limited 1.000378 0.001207 0.999 Gillette India Limited 0.971766 -0.13718 0.892 Surya Roshni Ltd 0.972807 -0.11048 0.913 Clearly, from Table 8 ASRV results were very consistent except two sample companies during mean period. The report reveals that there is existence of no statistical difference among three out of five sample companies; the exceptional companies were CMI Limited and Surya Roshni Ltd during mean period. In other words, the study found significant impact of dividend announcement on share price of CMI Limited and Surya Roshni Limited. http://www.iaeme.com/IJM/index.asp 72 editor@iaeme.com
Dr. A. Shanker Prakash The study further carried on to study the magnitude of returns for the sample companies by using CAAR test. Table 9 Outcome of CAAR Interpretation CAAR T-Test P-Value Accelya Kale Solutions 5.281821 9.54887 .000 Bhageria Industries Limit. 5.62907 11.73076 .000 SP CMI Limited -6.15492 -7.28015 .000 Gillette India Limited -3.90368 -6.87458 .000 Surya Roshni Ltd -16.6038 -17.5337 .000 Accelya Kale Solutions -6.01077 -7.77896 .000 Bhageria Industries Limit. -5.45139 -6.05475 .000 MP CMI Limited -7.1235 -11.8639 .000 Gillette India Limited -4.34938 -3.91403 .001 Surya Roshni Ltd -0.9697 -5.53717 .000 Accelya Kale Solutions 4.558044 11.2614 .000 Bhageria Industries Limit. 3.678986 5.705268 .000 CP CMI Limited 20.69913 10.56412 .000 Gillette India Limited -5.02762 -5.38302 .000 Surya Roshni Ltd -6.12344 -8.3802 .000 The Table 9 is used for disclosing the Outcome of CAAR, the result of which represents cent-percent significant result thereby reflecting the fact that dividend announcement is a normal strategy of a company which provide enough scope for the investors in the market as CAAR is significantly different from zero. 4. CONCLUSION This study intensively provides a look over the testing of dividend announcement in the market in two-fold fashion. The study is intended to observe whether there exists any difference between screening period, mean period and consequence period of impact of dividend. The built-upon conclusion revealed the fact that there are only two companies which reacted apparently during mean period and rest all companies were found significantly different from zero magnitude of return which shows market is not quickly absorbing dividend information and could not lead the market. Thus, the result shows that dividend announcement is regular practice of any company which could not change the leading trend & fashion to market. REFERENCES [1] Donald E. Fisher, Ronald J.Jordan, Security Analysis and Portfolio Management, Prentice Hall of India. [2] Edwin J. Eeton, Martin .J Gruber, John, Wily & Sons, Modern Portfolio Theory and Investment Analysis. [3] J. Fuller and James L Farell, Jr. Modern Investment and Security Analysis, McGraw Hill International Edition. [4] Jack Clark Fracis, McGraw Hill International Edition, Management of Investment. [5] Mohamed Ariff and Frank J. Finn, “Announcement Effects and Market Efficiency in a Thin Market: an Empirical Application to the Singapore Equity Market”, Asia Pacific Journal of Management, 6, No. 2: 243-265. [6] Samanta G.P. and Bordoloi S., 2005 “Predicting Stock Market- An Application of Artificial Neural Network Technique through Genetic Algorithm” Finance India Vol. XIX No.1, 173-188. http://www.iaeme.com/IJM/index.asp 73 editor@iaeme.com
An Empirical Study of Dividend Effect Through Two Fold Impact On Share Price [7] Sarkar N. and Mukopadhyay D., 2002, “Testing Market Efficiency in the Framework of Model Specification: An Empirical Investigation with Indian Data”, ERU Discussion Paper Series, ERU/2002-03. [8] Sarma S.N., 2004,”Stock Market Seasonality in an Emerging Market”, Vikalpa, Vol. 29 No. 3, 35-41. [9] Seiler and Rom, 1997, “A Historical Analysis of Market Efficiency: Do Historical Returns Follow a Random Walk?” Journal of Financial and Strategic Decisions, Vol.10 No.2, 49- 57. [10] Selvam M. and Babu K.A., 2009, “Analysis of Quarterly Earnings Announcement and Informational Efficiency of Indian Capital Market”, Finance India, Vol. XXIII No.2, 575- 604. [11] Neetu Mehndiratta & Shuchi Gupta, “Impact of Dividend Announcement on Stock Prices”, International Journal of Information Technology and Knowledge Management, July-December 2010, Volume 2, No. 2, pp. 405-410 [12] Byson B. Majanga, “The Dividend Effect on Stock Price-An Empirical Analysis of Malawi Listed Companies”, Accounting and Finance Research Vol. 4, No. 3; 2015, pp no. 99-105. http://www.iaeme.com/IJM/index.asp 74 editor@iaeme.com