A Study on Share Prices Reactions to Dividend Announcement and Execution in India: Overreaction or Drift?

Abstract

Highly conflicting views are found between theories and empirical studies regarding impact of dividend announcement and execution in the stock market and for the creation of wealth of the shareholders. This paper uses panel data approach and examines the study of 30 stocks considered for a time period of 2009 to 2013 to study stock market reaction pertaining to dividend announcement and execution. The study indicates positive abnormal return pre, on the day of announcement and post announcement period while discards possibility of positive abnormal return on pre-execution, on the day of execution and post execution and thus confirms that dividend announcement and not dividend execution increases wealth of the shareholders.