Stock Price Reaction to Dividend Announcements: an Empirical Study on Companies Listed in Malaysia Stock Exchange
Abstract
The dividend signaling hypothesis is one of the most prominent theories attempting to explain why firms distribute dividends. The purpose of this study is investigating the Malaysian stock market reactions to dividend change announcements of firms listed on the Malaysia Stock Exchange during the period of 2011 to 2018. The full sample examined is consists of 204 dividend changes announcements from 30 firms. The dividend changes in the final sample is distributed as follows; 89 dividend increases, 52 constant dividends, and 63 dividend decreases.
Results reported in this paper are obtained in terms of the event study methodology wherein the abnormal return of every company is computed thoroughly with a view to study the informational efficiency. The results of the analysis show that on the announcement date market response positively with increased dividend .For the constant dividend on the announcement date there is no new information is being convey to the market, Finally for decreased dividend on the announcement date market response positively with decreased dividend and that is against with-the information content of dividend hypothesis
