Impact of Dividends on Share Price Performance of Companies in Indian Context

Abstract

The study aims at finding the impact of dividends (cash and stock) on share price performance of companies in the Indian context. A sample of 67 fast moving consumer goods companies who made dividend announcements from April 2007 to August 2011 are taken. In this study, the Market Model Event Study Methodology has been employed to measure the effect of dividend announcements and its impact on the share price with a 41-day event window is taken. The stock price data is collected for 20 days prior to the dividend announcement, the share price on the announcement date (An date) t0 and 20 days post the dividend announcement. The findings indicate that the market is found to react positively to dividend announcements and with a significantly positive Average Abnormal Returns (AAR) around the announcement date.