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Signalling Effects of Dividend Announcements in Tehran Stock Exchange (TSE)

Author

Listed:
  • Abdorreza Asadi

    (Assistant Professor of Finance Department of Management, Neyshabur Branch, Islamic Azad University, Neyshabur, Iran.)

  • Ahmad Zendehdel

    (Assistant Professor of applied statistic Department of Management, Neyshabur Branch, Islamic Azad University, Neyshabur, Iran.)

Abstract

One of the noteworthy features of dividend policy is that dividend payment can affect share price and firms' value. This paper attempts to analyze the signaling effects of dividend announcements on stock prices using event study methodology in Iran. The study contains a sample of 80 Iranian firms over period of 1997-2008. Considering an event window of 30 days prior and 30 days after the announcement date, the study calculates Abnormal Returns and Cumulative Abnormal Returns using Risk Adjusted Market Model for three categories of dividend announcements, dividend increase, dividend decrease, and no-change in dividend. Then t-statistics and plots are used to analyze significance of the effects of the announcements on stock prices. The findings document that the announcements of dividend increase create positive abnormal returns while negative abnormal returns appear after the announcements of dividend decrease in the market.

Suggested Citation

  • Abdorreza Asadi & Ahmad Zendehdel, 2014. "Signalling Effects of Dividend Announcements in Tehran Stock Exchange (TSE)," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 5(2), pages 62-72, May.
    • Handle: RePEc:aii:ijcmss:v:5:y:2014:i:2:p:62-72
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    References listed on IDEAS

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