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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
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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.
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- 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.
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- 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.
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- 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
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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
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- 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
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- 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
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- 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.
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- 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.
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