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Announcement Effect of Cash Dividend Changes around Ex-Dividend Days: Evidence from Taiwan

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  • Jack J.W. Yang
  • Tsung-Hsin Wu

Abstract

Dividend policy has been a puzzle in corporate finance for many decades. So far, the dividend policy continues to be a puzzle in the strategic firm development process. This paper studied the effect of exdividend date for cash-dividend policy in the Taiwan Stock Exchange (TWSE) from 2001 to 2012. We try to demonstrate the existence of abnormal returns by examining stock trading situations before and after the ex-dividend date. We discovered the cumulative abnormal returns ratio reached 2.07% during the 10 days before and after the ex-dividend date. This paper further analyzes whether firms adopting cash-dividend changes have different abnormal returns on stock price performance depending on different variables. We discovered the average abnormal return ratio of the group with a cash dividend increase was 1.96%. The average abnormal return ratio of the group with a cash dividend decrease was 0.48%. Moreover, we analyze whether different industries impact cumulative abnormal return ratios. Finally, we discuss whether the cumulative abnormal return ratios were different before and after financial crisis.

Suggested Citation

  • Jack J.W. Yang & Tsung-Hsin Wu, 2015. "Announcement Effect of Cash Dividend Changes around Ex-Dividend Days: Evidence from Taiwan," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 9(2), pages 77-91.
    • Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:2:p:77-91
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    References listed on IDEAS

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    1. Milonas, Nikolaos T. & Travlos, Nickolaos G. & Xiao, Jason Zezhong & Tan, Cunkai, 2006. "The ex-dividend day stock price behavior in the Chinese stock market," Pacific-Basin Finance Journal, Elsevier, vol. 14(2), pages 155-174, April.
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    12. Jack J.W. Yang & Tsung-Shin Wu, 2014. "Price and Volume Reactions to Cash Dividend Announcements: Evidence from Taiwan," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 8(4), pages 83-96.
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    2. Bader Mustafa Al-Sharif, 2020. "Dividend-Payout Policy and Share-Price Volatility in Islamic Banks: Evidence from Jordan," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(3), pages 266-274, March.

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    More about this item

    Keywords

    Cash Dividend; Abnormal Returns; Event Study;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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