Study of Corporate Dividend Policy

Description
Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business.

[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
CHAPTER -1
DIVIEND POLICY- THE MECHANISAM
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
1.1 Introduction
Dividends are payments made by a corporation to its shareholder members. It is the portion of
corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that
money can be put to two uses: it can either be re-invested in the business (called retained
earnings), or it can be paid to the shareholders as a dividend. any corporations retain a portion
of their earnings and pay the remainder as a dividend.
!or a "oint stock company, a dividend is allocated as a fi#ed amount per share. $herefore, a
shareholder receives a dividend in proportion to their shareholding. !or the "oint stock company,
paying dividends is not an e#pense% rather, it is the division of an asset among shareholders.
&ublic companies usually pay dividends on a fi#ed schedule, but may declare a dividend at any
time, sometimes called a special dividend to distinguish it from a regular one.
'ooperatives, on the other hand, allocate dividends according to members( activity, so their
dividends are often considered to be a pre-ta# e#pense.
)ividends are usually settled on a cash basis, store credits (common among retail consumers(
cooperatives) and shares in the company (either newly-created shares or e#isting shares bought
in the market.) !urther, many public companies offer dividend reinvestment plans, which
automatically use the cash dividend to purchase additional shares for the shareholder.
*everal factors must be considered when establishing a firm+s dividend policy. $hese include
• $he li,uidity position of the firm - "ust because a firm has income doesn+t mean that
it has any cash to pay dividends.
• .eed to repay debt - oftentimes there are negative covenants that restrict the
dividends that can be paid as long as the debt is outstanding.
• $he rate of asset e#pansion - the greater the rate of e#pansion of the firm, the greater
the need to retain earnings to finance the e#pansion.
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DIVIDEND POLICY]
• 'ontrol of the firm - if dividends are paid out today, e,uity may have to be sold in the
future causing a dilution of ownership.
• /egal 'onsiderations:
• $echnically, it is illegal to pay a dividend e#cept out of retained earnings. $his is
to prevent firms from li,uidating themselves out from underneath the creditors.
• Internal 0evenue *ervice *ection 123 - Improper 4ccumulation of funds. $his is
to prevent individuals from not paying dividends in order to avoid the personal
income ta#es on the dividend payments.
Is it in the best interests of shareholders to pay out earnings as dividends or to reinvest them in
the company5 $he answer to this depends upon the investment opportunities that the firm has.
$here are three fundamental policies to paying cash dividends that firms employ:
3) &ay a constant dollar amount each year regardless of earnings per share. $his is what
most firms do.
6) 7se a constant payout ratio (for e#ample, 189 of :&*)
2) &ay a low, fi#ed dividend amount plus ;dividend e#tras< or ;special dividendsecause they have good investment opportunities
and reinvest the earnings.
1. !or"s o# P$%"ent
C$s& dividends (most common) are those paid out in the form of a che,ue. *uch dividends are a
form of investment income and are usually ta#able to the recipient in the year they are paid. $his
is the most common method of sharing corporate profits with the shareholders of the company.
!or each share owned, a declared amount of money is distributed. $hus, if a person owns 388
shares and the cash dividend is ?8.18 per share, the person will be issued a che,ue for ?18.
Stoc' or scri( dividends are those paid out in form of additional stock shares of the issuing
corporation, or other corporation (such as its subsidiary corporation). $hey are usually issued in
proportion to shares owned (for e#ample, for every 388 shares of stock owned, 19 stock
dividend will yield 1 e#tra shares). If this payment involves the issue of new shares, this is very
similar to a stock split in that it increases the total number of shares while lowering the price of
each share and does not change the market capitali=ation or the total value of the shares held.
Pro(ert% dividends or dividends in specie (/atin for @in kind@) are those paid out in the form of
assets from the issuing corporation or another corporation, such as a subsidiary corporation. $hey
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DIVIDEND POLICY]
are relatively rare and most fre,uently are securities of other companies owned by the issuer,
however they can take other forms, such as products and services.
Ot&er dividends can be used in structured finance. !inancial assets with a known market value
can be distributed as dividends% warrants are sometimes distributed in this way. !or large
companies with subsidiaries, dividends can take the form of shares in a subsidiary company. 4
common techni,ue for @spinning off@ a company from its parent is to distribute shares in the new
company to the old company(s shareholders. $he new shares can then be traded independently.
1.) D$tes
)ividends must be @declared@ (approved) by a company+s >oard of )irectors each time they are
paid. !or public companies, there are four important dates to remember regarding dividends.
$hese are discussed in detail with e#amples at the *ecurities and :#change 'ommission site
$he dec*$r$tion d$te is the day the >oard of )irectors announces its intention to pay a dividend.
An this day, a liability is created and the company records that liability on its books% it now owes
the money to the stockholders. An the declaration date, the >oard will also announce a date of
record and a payment date.
$he in-dividend d$te is the last day, which is one trading day before the ex-dividend date, where
the stock is said to be cum dividend ((with BincludingC dividend(). In other words, e#isting holders
of the stock and anyone who buys it on this day will receive the dividend, whereas any holders
selling the stock lose their right to the dividend. 4fter this date the stock becomes ex dividend.
$he e+-dividend d$te (typically 6 trading days before the record date for 7.*. securities) is the
day on which all shares bought and sold no longer come attached with the right to be paid the
most recently declared dividend. $his is an important date for any company that has many
stockholders, including those that trade on e#changes, as it makes reconciliation of who is to be
paid the dividend easier. :#isting holders of the stock will receive the dividend even if they now
sell the stock, whereas anyone who now buys the stock will not receive the dividend. It is
relatively common for a stock(s price to decrease on the e#-dividend date by an amount roughly
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DIVIDEND POLICY]
e,ual to the dividend paid. $his reflects the decrease in the company(s assets resulting from the
declaration of the dividend. $he company does not take any e#plicit action to ad"ust its stock
price% in an efficient market, buyers and sellers will automatically price this in.
Whenever a company announces a dividend pay-out, it also announces a @>ook closure )ate@
which is a date on which the company will ideally temporarily close its books for fresh transfers
of stock. 0ead @>ook 'losure@ for a better understanding.
*hareholders who properly registered their ownership on or before the d$te o# record, known as
stoc'&o*ders o# record, will receive the dividend. *hareholders who are not registered as of this
date will not receive the dividend. 0egistration in most countries is essentially automatic for
shares purchased before the e#-dividend date.
$he ($%"ent d$te is the day when the dividend checks will actually be mailed to the
shareholders of a company or credited to brokerage accounts.
1., T%(es o# Dividend Po*icies
$here are many distinct dividend policies, but most policies fall into one of three categories.
4. 4 stable dividend policy is characteri=ed by the tendency to keep a stable dollar amount of
dividends per share from period to period.
'orporations tend to establish a predetermined target dividend payout ratio in which
dividends are increased only after management is convinced that future earnings can support
the higher dividend payment. 7nder this policy, dividend changes will normally lag behind
earnings changes. !irms are reluctant to lower their dividend payments, even in times of
financial distress. ost firms follow a relatively stable dividend policy for four reasons:
3. any business e#ecutives believe that stable dividend policies lead to higher stock prices.
$he empirical evidence on the relationship between dividend policy and stock prices is
inconclusive.
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6. Investors may view constant or steadily increasing dividends as more certain than a
fluctuating cash dividend payment.
2. $here is less chance to si-n$* erroneous informational content with a stable dividend
policy. $hus, firms tend to avoid reducing the annual dividend because of the information
content that a dividend cut may 'onvey.
4&/:: 4mericana &roducts, Inc. earned ?E,888,888 last year and paid ?3.E8 per share in
dividends on 3,888,888 outstanding shares. >ecause of a temporary slump in the market, the firm
e#pects to earn ?2,F88,888 this year. If the 'ompany maintains a stable dividend policy, it will
maintain a ?3.E8 dividend per share, despite the e#pected decline in earnings.
>. 4 const$nt dividend ($%out r$tio (o*ic% is one in which a firm pays out a constant
percentage of earnings as dividends.
$his policy is easy to administer once the firm selects the initial payout ratio. 4 constant
dividend payout policy will cause dividends to be unstable and unpredictable, if earnings
fluctuate. !ew firms follow a constant dividend payout policy because stock prices may be
adversely affected by highly volatile dividends.
1.. !ACTORS A!!ECTIN/ DIVIDEND POLICY
1. St$0i*it% o# E$rnin-s. $he nature of business has an important bearing on the dividend policy.
Industrial units having stability of earnings may formulate a more consistent dividend policy
than those having an uneven flow of incomes because they can predict easily their savings and
earnings. 7sually, enterprises dealing in necessities suffer less from oscillating earnings than
those dealing in lu#uries or fancy goods.
. A-e o# cor(or$tion. 4ge of the corporation counts much in deciding the dividend policy. 4
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DIVIDEND POLICY]
newly established company may re,uire much of its earnings for e#pansion and plant
improvement and may adopt a rigid dividend policy while, on the other hand, an older company
can formulate a clear cut and more consistent policy regarding dividend.
). Li1uidit% o# !unds. 4vailability of cash and sound financial position is also an important
factor in dividend decisions. 4 dividend represents a cash outflow, the greater the funds and the
li,uidity of the firm the better the ability to pay dividend. $he li,uidity of a firm depends very
much on the investment and financial decisions of the firm which in turn determines the rate of
e#pansion and the manner of financing. If cash position is weak, stock dividend will be
distributed and if cash position is good, company can distribute the cash dividend.
,. E+tent o# s&$re Distri0ution. .ature of ownership also affects the dividend decisions. 4
closely held company is likely to get the assent of the shareholders for the suspension of
dividend or for following a conservative dividend policy. An the other hand, a company having a
good number of shareholders widely distributed and forming low or medium income group,
would face a great difficulty in securing such assent because they will emphasise to distribute
higher dividend.
.. Needs #or Addition$* C$(it$*. Co"($nies retain a part of their profits for strengthening their
financial position. $he income may be conserved for meeting the increased re,uirements of
working capital or of future e#pansion. *mall companies usually find difficulties in raising
finance for their needs of increased working capital for e#pansion programmes. $hey having no
other alternative, use their ploughed back profits. $hus, such 'ompanies distribute dividend at
low rates and retain a big part of profits.
2. Tr$de C%c*es. >usiness cycles also e#ercise influence upon dividend &olicy. )ividend policy
is ad"usted according to the business oscillations. )uring the boom, prudent management creates
food reserves for contingencies which follow the inflationary period. Gigher rates of dividend
can be used as a tool for marketing the securities in an otherwise depressed market. $he financial
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DIVIDEND POLICY]
solvency can be proved and maintained by the companies in dull years if the ade,uate reserves
have been built up.
3. /overn"ent Po*icies. $he earnings capacity of the enterprise is widely affected by the
change in fiscal, industrial, labour, control and other government policies. *ometimes
government restricts the distribution of dividend beyond a certain percentage in a particular
industry or in all spheres of business activity as was done in emergency. $he dividend policy has
to be modified or formulated accordingly in those enterprises.
4. T$+$tion Po*ic%. Gigh ta#ation reduces the earnings of he companies and conse,uently the
rate of dividend is lowered down. *ometimes government levies dividend-ta# of distribution of
dividend beyond a certain limit. It also affects the capital formation. . India, dividends beyond
38 9 of paid-up capital are sub"ect to dividend ta# at H.1 9.
5. Le-$* Re1uire"ents. In deciding on the dividend, the directors take the legal re,uirements
too into consideration. In order to protect the interests of creditors an outsiders, the companies
4ct 3I1F prescribes certain guidelines in respect of the distribution and payment of dividend.
oreover, a company is re,uired to provide for depreciation on its fi#ed and tangible assets
before declaring dividend on shares. It proposes that )ividend should not be distributed out of
capita, in any case. /ikewise, contractual obligation should also be fulfilled, for e#ample,
payment of dividend on preference shares in priority over ordinary dividend.
16. P$st dividend R$tes. While formulating the )ividend &olicy, the directors must keep in
mind the dividend paid in past years. $he current rate should be around the average past rat. If it
has been abnormally increased the shares will be sub"ected to speculation. In a new concern, the
company should consider the dividend policy of the rival organisation.
11. A0i*it% to 7orro8. Well established and large firms have better access to the capital market
than the new 'ompanies and may borrow funds from the e#ternal sources if there arises any
need. *uch 'ompanies may have a better dividend pay-out ratio. Whereas smaller firms have to
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DIVIDEND POLICY]
depend on their internal sources and therefore they will have to built up good reserves by
reducing the dividend pay out ratio for meeting any obligation re,uiring heavy funds.
1. Po*ic% o# Contro*. &olicy of control is another determining factor is so far as dividends are
concerned. If the directors want to have control on company, they would not like to add new
shareholders and therefore, declare a dividend at low rate. >ecause by adding new shareholders
they fear dilution of control and diversion of policies and programmes of the e#isting
management. *o they prefer to meet the needs through retained earing. If the directors do not
bother about the control of affairs they will follow a liberal dividend policy. $hus control is an
influencing factor in framing the dividend policy.
1). Re($%"ents o# Lo$n. 4 company having loan indebtedness are vowed to a high rate of
retention earnings, unless one other arrangements are made for the redemption of debt on
maturity. It will naturally lower down the rate of dividend. *ometimes, the lenders (mostly
institutional lenders) put restrictions on the dividend distribution still such time their loan is
outstanding. !ormal loan contracts generally provide a certain standard of li,uidity and solvency
to be maintained. anagement is bound to hour such restrictions and to limit the rate of dividend
payout.
1,. Ti"e #or P$%"ent o# Dividend. When should the dividend be paid is another consideration.
&ayment of dividend means outflow of cash. It is, therefore, desirable to distribute dividend at a
time when is least needed by the company because there are peak times as well as lean periods of
e#penditure. Wise management should plan the payment of dividend in such a manner that there
is no cash outflow at a time when the undertaking is already in need of urgent finances.
1.. Re-u*$rit% $nd st$0i*it% in Dividend P$%"ent. )ividends should be paid regularly because
each investor is interested in the regular payment of dividend. $he management should, inspite
of regular payment of dividend, consider that the rate of dividend should be all the most constant.
!or this purpose sometimes companies maintain dividend e,uali=ation !und.
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DIVIDEND POLICY]
C&$(ter 9 Rese$rc& Met&odo*o-%
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DIVIDEND POLICY]
Rese$rc& Pro0*e":
:fficient arket Gypothesis states that it is impossible to Jbeat the market+ because the stock
market efficiency causes the stock prices to incorporate and reflect all the new information in the
stock prices. We want to study whether the markets are efficient when the dividend policy is
announced by the corporate. $here are certain issues which are to be focused upon. $hey are:
• $o find out any relation between corporate dividend policy and market value of a
company.
• $o analy=e the effect of corporate dividend decisions in terms of creating abnormality in
the price and volume of the company.
• $o check whether the markets are efficient when any news about dividend decisions of a
company is received.
Liter$ture Revie8:
• Modi-*i$ni $nd Mi**er (3IF3) have shown, investors may be indifferent about the
amount of dividend as it has no influence on the value of a firm. 4ny investor can create
a Jhome made dividend+ if re,uired, or can invest the proceeds of a dividend payment in
additional shares as and when a company makes dividend payment. *imilarly, managers
may be indifferent as funds would be available or could be raised without any floatation
costs for all positive net present value pro"ects.
• Lintner (3I1F) analy=es as to how firms set dividends and concluded that firms have
four important concerns. !irstly, firms have long-run target dividend payout ratios. $he
payout ratio is high in case of mature companies with stable earnings and low in case of
growth companies. *econdly, the dividends change follows shift in long-term sustainable
earnings. $he managers are more concerned with dividend changes than on absolute
level. !inally, managers do not intend to reverse the change in dividends. Ge finds that
firms pay predictable and regular dividends to investors% whereas the earnings of
corporate firms could be erratic. $his implies that shareholders prefer smoothened
dividend income.
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• 7re$*e% (3II6) poses the dividend policy decision as ;What is the effect of change in
cash dividends, given the firm+s capital-budgeting and borrowing decisions5< In other
words, he looks at dividend policy in isolation and not as a by-product of other corporate
financial decisions.
• 7$'er; Veit $nd Po8e** (6883) study the factors that have a bearing on dividend policy
of corporate firms traded on the .asda,. $he study, based on a sample survey (3III)
response of 3KK firms out of a total of F28 firms that paid dividends in each ,uarter of
calendar years 3IIF and 3IIH, finds that the following four factors have a significant
impact on the dividend decision: ($ttern o# ($st dividends; st$0i*it% o# e$rnin-s; $nd
t&e *eve* o# current $nd #uture e+(ected e$rnin-s. $he study also finds statistically
significant differences in the importance that managers attach to dividend policy in
different industries such as financial versus non-financial firms.
• !$"$ $nd !renc& (6883) analy=ed the issue of lower dividends paid by corporate firms
over the period 3IH2-3III and the factors responsible for the decline. In particular, they
analy=ed whether the lower dividends were the effect of changing firm characteristics or
lower propensity to pay on the part of the firms. $hey observed that proportion of
companies paying dividend has dropped from a peak of FF.19 in 3IHK to 68.K9 in 3III.
$hey attributed this decline to the changing characteristics of firms: ;$he decline in the
incidence of dividend payers is in part due to an increasing tilt of publicly traded firms
toward the characteristics- small si=e, low earnings, and high growth- of firms that
typically have never paid dividends.<
O0*:-188 inde# and share prices of selected
companies.
• /imited to $op 28 companies according to market capitali=ation and which have
declared dividend in the year 688I.
• /imited to >*:-188 companies only.
S$"(*in-:
• S$"(*in- Tec&ni1ue : Ludgmental sampling
• S$"(*in- =nit : Ane company of >*:-188
• S$"(*in- Si>e : 28 companies from >*:-188 inde#
D$t$ Sources:
• Second$r% D$t$
? &rowess software of 'I:
? Internet *ources
? >usiness Lournals
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DIVIDEND POLICY]
? 0esearch papers
Met&od o# An$*%sis:
• '4& (0egression odel)
Li"it$tion o# t&e Surve%:
• $he results of the analysis might differ if any model other than '4& (0egression
odel) is used.
• $he study is limited to the top 28 companies from >*:-188 inde#, which have declared
dividend in the year 688I.
• While studying the effect of corporate dividend policy on the market price of the script,
it is assumed that all the other factors affecting the market price are constant.
In this part, we will e#plain you how we have calculated the abnormal return using the e#cel
worksheet from the data that we got from the &rowess )atabase. We will also e#plain you how to
read each and every data and information that we generated and mentioned in the report.
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DIVIDEND POLICY]
Ste(s to #ind out A0nor"$* Price E##ect
A. Co**ect d$t$ #ro" Pro8ess D$t$0$se $nd sent it to E+ce* ?or's&eet
4s we mentioned earlier, we gathered daily share price data from &rowess )atabase software
and then to process on the data we sent them to the e#cel worksheet. $he above sheet represents
the type of data that we got. We got closing price data, total volume traded, number of trade took
place during the day, total turnover took place during the day, total market capital of >*: 188
and closing value of >*: 188 inde#.
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7. !ind out d$i*% scri(t return
$o process further, we need to find out daily script return of each day in comparison with the
previous day+s closing price. 4s this sheet represents how we found out the daily script return
in percentage terms by taking previous day+s closing as base.
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C. !ind out d$i*% M$r'et Return
$o find out the daily market return, we used the same formula as we had used in finding out
the daily script return. 4s we can see in this sheet, we found out the >*: 188 return by taking
previous day+s closing as a base. $he return that we found out by the mentioned formula was
in terms of numbers, but we turned it into percentage to make it meaningful interpretation.
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D. !ind out t&e re-ression 0et8een scri(t return $nd "$r'et return
4fter finding out the daily script and market return for the event period, the ne#t step is to
find out the regression between script and market return. $o find out the regression, we
selected the period of 2 months before the 4nnouncement )ate of the dividend to 3 month
before the 4nnouncement of the dividend (4)-I8 to 4)-28). $his is because we assume that
most of abnormality in trading can start at ma# 3 month before the dividend announcement
due to some insider leakage of information. >efore that period, script tends to react in a
normal manner.
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*o in our research, that period would be the standard normal period which could be used to
find out e#pected return. 4s we can see in this window, the M range indicates script return for
the above mentioned period and D range indicates market return for the above mentioned
period. $hen using the * :#cel 0egression analysis tool (which is there in the $ools menu),
we found out the regression analysis chart which is shown below. B$o get the 0egression tool,
go to $ools menu, then to 4dd InnN and select 4nalytical $ool &ack, after that go to tools
menu again and you will find )ata 4nalysis in the list, go into that and regression option.C
Ance we feed data in the above model, we could find out the summary output as mentioned
in this sheet. !rom the summary that we got, there are 2 things important for our research.
$hey are shown here: 0-*,uare, 4lpha and >eta. $he e#planation of each of the terms and
how to read that data is given below:
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R-S1u$re:
$he 0-*,uared value shows how reliable the dependent variable on the independent variable
is. It varies between 8 and 3. 4n 0-*,uared value of 3 indicates perfect correlation with the
inde#. $he higher the 0-*,uare, the better correlation e#ists between the script return and
market return. *o that leads to some of good decision making and helps in proper "udgment
and interpretation. Oenerally, 0-*,uare of more than 8.18 is considered to be good.
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Y-Interce(t @$A A*(&$A
$he Ja+ is called the M-intercept because its value is the point at which the regression line
crosses the M-a#is that is the vertical a#is. It is also called 4lpha.
S*o(e o# *ine @0A 7et$A
$he Jb+ is called the slope of the line. It represents how much each unit change of the
independent variable D changes the dependent variable M. It is also called >eta of script in
comparison of market.
>oth Ja+ and Jb+ are numerical constants because for any given straight line, their values do
not change.
E. !ind out E+(ected Return
*o from the above figures, we can frame a regression line for each of the script as follows:
YB $C0D
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*uppose we know that Ja+ is 2 and Jb+ is 6. /et us determine what M would be for an D e,ual
to 1. When we substitute the values of a, b and # in the above e,uation, we find the
corresponding value of M to be 32. 4s mentioned in the above regression line, we found out
the e#pected return for the event period (4)-28 to P28). $he formula used can be seen in
this sheet.
!. !ind out t&e $0nor"$* return
$he abnormal return for a given day can be found out by subtracting e#pected return for a
day (which is found by using regression line as shown above) from the actual return for a day
(which is found out in step >). $his sheet represents the same thing. &ositive abnormal return
indicate that how much positive effect is generated by the event among the investors. In the
same way, negative abnormal return indicate clearly the opposite scenario for the script. 4s
we can see in this sheet, the abnormal for is because the actual return on the
script is which is indeed very high than the e#pected return of for that day. $his return
is for only one day. $he real effect of such event can be seen by taking broader view and
seeing cumulative effect through a particular period.
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/. !ind out Cu"u*$tive $0nor"$* return
4s mentioned above, to study the long term and short term effect of the event, we have
divided the event period in different windows. *o to check the cumulative effect of the
abnormal return in a given window can be found out by getting cumulative abnormal return
for that period. *o we have found out the cumulative abnormal return for each window by
using the formula which can be seen in this sheet. $he detail of cumulative abnormal return
for each script is shown in the ne#t chapter.
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H. !ind out t&e Cu"u*$tive $0nor"$* return #or $ -iven 8indo8
!rom the above sheet, we can see how to find out cumulative abnormal return for a given
window. 4s we can see that in window 4)-28 to 4)-3, the cumulative abnormal return is ,
so there is positive abnormality in return can be seen 3 month before the split was announced
but we can see in other window 4)-38 to 4)-3 that the cumulative abnormal return is large
negative and which indicates some kind of leakage in information must be done before
the dividend was actually announced. In the same way, we can observe cumulative abnormal
return ('40) for different window.
In order to draw overall inferences for the event of interest, the abnormal return observations
are aggregated along the 6 dimensions- through time and across securities. $he following
measures of abnormal performance are used:
Cu"u*$tive A0nor"$* Return @CARA: cumulative sum of stock i+s prediction error
(abnormal returns) over the window (t3,t6)
CARi@t1;tAB1ET ARi<
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Aver$-e A0nor"$* Return @AARA: stock i+s cumulative abnormal return divided by
the number of days in the window (t3,t6)
AARi @t1;tAB CARi @t1;tAEni @t1;tA
Me$n Cu"u*$tive A0nor"$* Return @MCARA: average of the cumulative abnormal
returns sample average of firm 440s. $his measure of abnormal performance takes into
account the fact that the number of days in that window (t3,t6) may be different across firms
and therefore gives a greater weight to the 40s of firms for which this window is shorter. An
the contrary, '40 gives same weight to every 40s. $his implies that 440 is more
powerful when the ;abnormal behavior< of returns is concentrated in short window, while
'40 is more powerful in detecting abnormal performance over long window.across
observations (firms)% it is a measure of the abnormal performance over the event period,
MCAR @t1;tAB 1EN CARi @t1;tA
Me$n Aver$-e A0nor"$* Return @MAARA:
MAAR @t1;tAB1EN AARi @t1;tA
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Ste(s to #ind out A0nor"$* Vo*u"e E##ect
A. Find out average daily volume
We found out the abnormal volume trading by using simple average and deviation of actual
volume from the average volume. *o to find out abnormal volume the very first step is to find
out average volume. 4s we assume that there is normal trading takes place from the 2 months
before the announcement date to the 3 month before the announcement date. *o we took the
average of that period using simple average formula as can be seen un this data sheet. $he
average we get is the daily average volume and it becomes the benchmark for our study and we
can compare the actual volume with this average volume.
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B. Find out abnormal volume
$o find out abnormal volume trading we subtract average volume from the total volume for a day
given. $he abnormal volume can be positive of negative. >ut in real life the volume traded can+t
be negative. Gere negative abnormal volume indicates how much less volume trading takes place
in comparison to e#pected volume traded.
C. Find out cumulative abnormal volume
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4s we have found in cumulative price effect in the same way we can found out the cumulative
volume traded for a given time period. $his sheet represents the same thing. 'umulative
abnormal volume is useful as it indicate how much abnormality in volume can be seen in given
window period or time period.
D. Find out cumulative abnormal volume for a given window
4s already e#plain in the price effect, in the same way cumulative abnormal volume for a given
window can be found out using the above mentioned formula. 4s we can see that there is huge
abnormal volume trading can be seen on announcement date and dividend date.
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C&$(ter 9 ) E##icient M$r'et H%(ot&esis And
R$ndo" ?$*' T&eor%
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).1 Introduction
In finance, the e##icient-"$r'et &%(ot&esis (EMH) asserts that financial markets are
@informationally efficient@. $he weak version of :G suppose that prices on traded assets (e.g.,
stocks, bonds, or property) already reflect all past publicly available information. $he semi-
strong version supposes that prices reflect all publicly available information and instantly change
to reflect new information. $he strong version supposes that market reflects even hiddenQinside
information. $here is some disputed evidence to suggest that the weak and semi-strong versions
are valid while there is powerful evidence against the strong version. $herefore, according to
theory, it is improbable to consistently outperform the market by using any information that the
market already has, e#cept through inside trading. Information or news in the :G is defined as
anything that may affect prices that is unknowable in the present and thus appears randomly in
the future. $he hypothesis has been attacked by critics who blame the belief in rational markets
for much of the financial crisis of 688H-6838, with noted financial "ournalist 0oger /owenstein
declaring @$he upside of the current Oreat 0ecession is that it could drive a stake through the
heart of the academic nostrum known as the efficient-market hypothesis.@

$he efficient-market hypothesis was developed by &rofessor :ugene !ama at the 7niversity of
'hicago >ooth *chool of >usiness as an academic concept of study through his published &h.).
thesis in the early 3IF8s at the same school. It was widely accepted up until the 3II8s, when
behavioral finance economists, who were a fringe element, became mainstream. :mpirical
analyses have consistently found problems with the efficient-market hypothesis, the most
consistent being that stocks with low price to earnings (and similarly, low price to cash-flow or
book value) outperform other stocks. 4lternative theories have proposed that cognitive biases
cause these inefficiencies, leading investors to purchase overpriced growth stocks rather than
value stocks. 4lthough the efficient-market hypothesis has become controversial because
substantial and lasting inefficiencies are observed, >eechey et al. (6888) consider that it remains
a worthwhile starting point.
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). T&e E##icient M$r'et H%(ot&esis
When the term Jefficient market+ was introduced into the economics literature thirty years ago, it
was defined as a market which Jad"usts rapidly to newinformation+ (!ama et al 3IFI).It soon
became clear, however, that while rapid ad"ustment to new information is an important element
of an efficient market, it is not the only one. 4 more moderndefinition is that asset prices in an
efficient market Jfully reflect all available information+ (!ama 3II3). $his implies that the
market processes information rationally, in the sense that relevant information is not ignored, and
systematic errors are not made. 4s a conse,uence, prices are always at levels consistent with
Jfundamentals+.$he words in this definition have been chosen carefully, but they nonetheless
mask some of the subtleties inherent in defining an efficient asset market. !or one thing, this is a
strong version of the hypothesis that could only be literally true if Jall available information+ was
costless to obtain. If information was instead costly, there must be a financial incentive to obtain
it. >ut there would not be a financial incentive if the information was already Jfully reflected+ in
asset prices (Orossman and *tiglit= 3IK8). 4 weaker, but economically more realistic, version of
the hypothesis is therefore that prices reflect information up to the point where the marginal
benefits of acting on the information (the e#pected profits to be made) do not e#ceed the
marginal costs of collecting it (Lensen 3IHK).
*econdly, what does it mean to say that prices are consistent with fundamentals5 We must have a
model to provide a link from economic fundamentals to asset prices. While there are candidate
models in all asset markets that provide this link, no-one is confident that these models fully
capture the link in an empirically convincing way. $his is important since empirical tests of
market efficiency - especially those that e#amine asset price returns over e#tended periods of
time - are necessarily "oint tests of market efficiency and a particular asset-price model.When the
"oint hypothesis is re"ected, as it often is, it is logically possible that this is a conse,uence of
deficiencies in the particular asset-price model rather than inthe efficient market hypothesis. $his
is the Jbad model+ problem (!ama 3II3).
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!inally, a comment about the word Jefficient+. It appears that the term was originally chosen
partly because it provides a link with the broader economic concept of efficiency in resource
allocation. $hus, !ama began his 3IH8 review of the efficient market hypothesis (specifically
applied to the stockmarket):
$he primary role of the capital BstockC market is allocation of ownership of theeconomy+s
capitalstock. In general terms, the ideal is a market in which pricesprovide accurate signals for
resource allocation: that is, a market in which firms canmake production-investment decisions,
and investors can choose among the securities that represent ownership of firms+ activities under
the assumption that securities prices at any time Jfully reflect+ all available information.$he link
between an asset market that efficiently reflects available information (atleast up to the point
consistent with the cost of collecting the information) and its role in efficient resource allocation
may seem natural enough. !urther analysis has made it clear, however, that an informationally
efficient asset market need not generate allocative or production efficiency in the economy more
generally. $he two concepts are distinct for reasons to do with the incompleteness of markets and
the information-revealing role of prices when information is costly, and therefore valuable
(*tiglit= 3IK3).
).) Predictions o# E##icient M$r'et H%(ot&esis
$he efficient market hypothesis yields a number of interesting and testable predictions about the
behaviour of financial asset prices and returns. 'onse,uently, a vast amount of empirical
research has been devoted to testing whether financial markets are efficient. While the Jbad
model+ problem plagues some of this research, it is possible to draw important conclusions about
the informational efficiency of financial markets from the e#isting body of empirical research.
$his section presents a selective survey of the evidence. Aur conclusions are summarised in the
table and e#plained in more detail in the pages that follow.
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Prediction E"(iric$* Evidence
4sset prices move as random
walks over time.
4ppro#imately true. Gowever:
*mall positive autocorrelation for short-
hori=on (daily, weekly and
monthly) stock returns.
!ragile evidence of mean reversion in stock
prices at long hori=ons
(2-1 years).
.ew information is rapidly
incorporated into asset prices,
and currently available
information cannot be used to
predict future e#cess returns.
.ew information is usually incorporated
rapidly into asset prices,
although there are some e#ceptions.
An current information:
In the stockmarket, shares with high returns
continue to produce
high returns in the short run (momentum
effects)
In the long run, shares with low price-earnings
ratios, high bookto-
market-value ratios, and other measures of
Jvalue+ outperform
the market (value effects).
In the foreign e#change market, the current
forward rate helps to
predict e#cess returns because it is a biased
predictor of the future
e#change rate.
$echnical analysis should
provide no useful information
$echnical analysis is in widespread use in
financial markets.
i#ed evidence about whether it generates
e#cess returns.
!und managers cannot
systematically outperform the
market.
4ppro#imately true. *ome evidence that fund
managers
systematically underperform the market.
4sset prices remain at levels
consistent with economic
fundamentals% that is, they are
not misaligned.
4t times, asset prices appear to be significantly
misaligned, for
e#tended periods.
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)., R$ndo" ?$*' T&eor%
?&$t It Is:
$he random walk theory states that market and securities prices are random and not influenced
by past events. $he idea is also referred to as the @weak form efficient-market hypothesis.@
&rinceton economics professor >urton O. alkiel coined the term in his 3IH2 book A Random
Walk Down Wall Street.
).. Ho8 it ?or'sEE+$"(*e:
$he central idea behind the random walk theory is that the randomness of stock prices renders
attempts to find price patterns or take advantage of new information futile. In particular, the
theory claims that day-to-day stock prices are independent of each other, meaning that
momentum does not generally e#ist and calculations of past earnings growth does not predict
future growth. alkiel states that people often believe events are correlated if the events come in
@clusters and streaks,@ even though streaks occur in random data such as coin tosses.
$he random walk theory also states that all methods of predicting stock prices are futile in the
long run. alkiel calls the notion of intrinsic value undependable because it relies on sub"ective
estimates of future earnings using factors like e#pected growth rates, e#pected dividend payouts,
estimated risk, and interest rates.
$he random walk theory also considers technical analysis undependable because, according to
alkiel, chartists buy only after price trends are established and sell only after price trends are
broken% essentially, the chartists buy or sell too late and miss the boat. 4ccording to the theory,
this happens because stock prices already reflect the information by the time the analyst moves
on the stock. alkiel also notes that the widespread use of technical analysis reduces the
advantages of the approach.
!urther, alkiel finds fundamental analysis flawed because analysts often collect bad or useless
information and then poorly or incorrectly interpret that information when predicting stock
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values. !actors outside of a company or its industry may affect a stock price, rendering further
the fundamental analysis irrelevant.
$here are two forms of the random walk theory. In both forms, the rapid incorporation of
information is disadvantageous for investors and analysts. $he semi-strong form states that
public information will not help an investor or analyst select undervalued securities because the
market has already incorporated the information into the stock price. $he strong form states that
no information, public or private, will benefit an investor or analyst because even inside
information is reflected in the current stock price.
alkiel acknowledges some statistical anomalies pointing to some e#ceptions to the random
walk theory:
3. &rices of small, less li,uid stocks seem to have some serial price correlation in the short-term
because they do not incorporate information into their prices as ,uickly.
6. 'ontrarian strategies tend to outperform other strategies because reversals are often based on
economic facts rather than investor psychology.
2. $here are seasonal trends in the stock market, especially at the beginning of the year and the
end of the week.
E. *tocks with low &Q: ratios tend to outperform those with high &Q:s, although the tendency is
volatile over time.
1. Gigh-dividend stocks tend to provide higher returns over time because during down markets
the high dividend yields often create demand for these stocks and thus increases the price.
).. ?&% It M$tters:
$he random walk theory proclaims that it is impossible to consistently outperform the market,
particularly in the short-term, because it is impossible to predict stock prices. $his may be
controversial, but by far the most controversial aspect of the theory is its claim that analysts and
professional advisors add little or no value to portfolios. 4s alkiel put it, @Investment advisory
services, earnings predictions, and complicated chart patterns are useless... $aken to its logical
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e#treme, it means that a blindfolded monkey throwing darts at a newspaper(s financial pages
could select a portfolio that would do "ust as well as one carefully selected by the e#perts.@
alkiel and the random walk theory provide considerable support to the intimidated individual
investor, but alkiel in particular encourages investors to understand the theories and investment
methods that the random walk theory challenges. alkiel therefore advocates a buy-and-hold
investment strategy as the best way to ma#imi=e returns.
).2 Do Asset Prices Move $s R$ndon ?$*'sF
4sset prices in an efficient market should fluctuate randomly through time in response to the
unacticipated component of news (*amuleson 3IK1). &rices may e#hibit trends over time, in
order that the total return on a financial asset e#ceed the return on a risk-free asset by an amount
commensurate with the level of risk undertaken in holding it. Gowever, even in this case,
fluctuations in the asset price away from trend should be unpredictable. $his section e#amines
the emphirical evidence for this Jrandom walk hypothesis+ for stock prices. An balance, the
evidence suggests that the hypothesis is at least appro#imately true. While stock returns are
partially predictable, both in the short run and the long run, the degree of predictability is
generally small compared to the high variability of returns.
In the aggregate 7* share market% above-average stock returns over a daily, weekly or monthly
interval increase the likelihood of further above-average returns in the subse,uent period
('ampbell, /o and ackinlay 3IIH). Gowever, for e#ample, only about 36 per cent of the
variance in the daily stock price inde# can be predictability than portfolios of large stocks. $here
is also some weak evidence that the degree of predictability has diminished over time. In a
related literature, a number of studies have found evidence of mean reversion in returns on stock
portfolios at hori=ons of three to five years or longer (&oterba and *ummers 3IKK% !ama and
!rench 3IKK). $his implies that a ling period of below-average stock returns increases the
likelihood of a period of above-average returns in the future. $hese conclusions are less robust,
however, than the findings of short-run predictability in returns. $he most important problem is
that since long-hori=on return are measured over years, rather than days or weeks, there are
fewer data points available, making precise statistical inference difficult.
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.
C&$(ter -, Dividend Decisions:
Pr$ctic$* !$cts
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,.1 Dividend decisions
)ividends decisions are an important aspect of corporate financial policy since they can hae an
effect on the availability as well as the cost of capital. $he /intner proposition which asserts that
the corporate management maintains a constant target payout ratio has been the most influential.
Gowever, the concepts of primary of dividend decisions as well as the reasons for it are not
unambiguously defined. $here is a variety of theories which attempt to rationali=e the observed
secular constancy of the dividend payout ratio. $hese studies e#amine the factors underlying the
secular constancy of the dividend payout ratio. $hese studies e#amine the factors underlying the
structure of the management, the nature of the product and financial markets, as well as the
influence of the shareholders in their attempt to e#plain the /intner proposition. Gowever, in the
case of any one firm, the following two pertinent ,uestions need to be e#amined on an empirical
basis to provide substance to the notion of primary of dividend decisions. (a) What are dividend
decisions primary for5 4nd (b) for whom are they primary5 4n attempt has been made to
develop a theoretical framework to approach these ,uestions and identify the appropriate concept
of primary and determine empirically the relationship of the primary notion with the ob"ectives
of the share holders and the management.
$he modelling framework postulates that (a) the dividend decisions may be primary to
management of the firm andQor the shareholder, and (b) each of the decision makers can have a
short run andQor long run ob"ective when they evaluate dividend decisions. *hare price increases
have been postulated as the basic short run ob"ective of both the groups of decisions. *hare price
increases have been postulated as the basic short run ob"ective of both the groups of decision
makers. *imilarly, both the share holders and the management are viewed as net worth
ma#imi=es over long run.
$he fundamental hypothesis for the short run models is that the management increases the
dividend per share whenever the share price, and that the share holder responds, to these in such
a way as to increase the share price. $his result is e#pected if dividend decisions are primary for
both the groups.
In the long run conte#t, it was felt that a progressive management would increase the net worth
the firm by investments in fi#ed assets of through building the reserve base. )ividends would be
primary decision if the internal financing of investment is constrained by the necessity to pay
dividends at a constant rate.
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$hese are two e#treme forms on which dividend decisions can be considered to be primary. 4
variety of intermediate positions are possible in any specific case of a firm. $he models were
designed to accommodate a rich variety of such behavioural patterns. $he theoretical structure
was empirically tested for H3 firms of the corporate sector in F industries using the data of the
>ombay *tock :#change )irectory for the period 3IFH-FK to 3IK8-3. $he results generally
indicate indicate that the methodology of the present study would be helpful in e#amine the
notion of the primary of corporate dividend policy.
T&e #o**o8in- $re t&e s$*ient #e$tures o# t&e e"(iric$* resu*ts.
@$A In the case of 3H firms dividend decisions were found to be primary. $he factors which
accounted for primary were the following:
(3) .eed to build the desired internal reserve base in the long run, and
(6) Inade,uacy of funds to finance available investment opportunities while maintaining a
desired payout ratio.
@0A $he /intner hypothesis was validated under the following circumstance:
(3) $he managers are oriented towards building up reserves to minimi=e dependence on
e#ternal funds,
(6) $here is a lack of motivation or market opportunity for growth of the firm and
(2) $here is no shortage of funds to pursue the desired ob"ectives.
@cA &rimary of dividends in the long run was observed in the case of 6H firms. $he significant
reasons were
(3) *hortage of funds to take care of growth opportunities as well as re,uisite dividends, and
(6) Inade,uacy of funds the desired reserve base.
$hroughout this analysis dividend decisions were considered to be primary, if and only if, both
the groups of decision makers agree to the same ob"ective and respond to each other+s perception
of goal satisfaction. Riewed from this vantage point dividend decision were primary only in a
few cases. $he /intner hypothesis of a constant dividend payout ratio appears to hold only
because of managerial motivations and not as a response to share holders desire. $o that e#tent
attributing primary to dividend decisions in such content appears to be misplaced. ost of the
management in the corporate sector appears to desire the security of internal financing and build
reserves s a priority after paying certain minimum dividend per share. )espite these conclusions
from the models of the present study two inade,uacies became apparent during the course of
work: (a) the goals pursued by the management and the share holders can be at variance. $he
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conflict resolution mechanism has not been e#plicitly modeled. (b) $he interrelationships
between the short run and long run models are as yet tenuous. !urther progress along these lines
is possible. >ut it will be an agenda for the future.
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,. Ro*e o# insider Tr$din-
$he e#istence and implications of asymmetric information in financial markets has been the
sub"ect of e#tensive research in the finance literature. $wo of the ma"or propositions in this
literature are that (3) corporate insiders take advantage of asymmetric information by trading on
their informational advantage and (6) dividend policy is related to asymmetric information.
$aken together, these propositions imply that the dividend policy of a firm and the trading gain
reali=ed by its insiders may be related because both are related to the level of information
asymmetry between the firms insider and outside investors.
$he first proposition arises from the widely accepted notion that corporate insiders often possess
and trade on information about the value of their firms shares (relative to the current stock price)
that outside investors do not possess. $his information asymmetry gives insiders the ability to
identify and take advantage of mispricing in the shares of their own firms. Laffe(3IHE), finnerty
(3IHF), seyhun (3IKF), "eng, etrick, and Seckhauser (3III), and /akonishok and /ee (6883)
provide evidence that insiders earn significant abnormal profits from trading in their own firms
shares, though estimates of the si=es of the si=e of these profits vary widely. It should be noted
that this trading is within the legal boundaries set by the securities and e#change commission
(*:') and is therefore not illegal insider trading.
$he second proposition is consistent with three different theories about the role of dividend
policy in financial markets. $he first theory is what we shall refer to as the ; free cash flow
theory< of dividends. $his theory focuses on the divergence of interest between managers and
shareholders and on dividends as a disciplining mechanisam that reduces the agency cost
associated with such a divergence. $he payment of dividend reduces free cash flow, forcing firms
to enter the capital market more fre,uently and divulge information as they attempt to get
financing for their operations and investments. $his sub"ect them to the scrutiny of investment
bankers, analysts, and potential new investors more often and serves to reduce the investors.
$hus, higher dividend should be associated with reduced information asymmetry, all else being
e,ual.
$he second theory is what we shall call the ;institutional monitoring theory< which is based on
allen bernardo and Welch (6888). $his theory rests on two assumptions. $he first is that
insitiutional investors are more effective at monitoring management than retail investors. )ue to
the si=e of their investments and the resources at their disposal, institutional investors have
greater incentive and ability to gather and analy=e information pertaining to their investments, as
well as a greater ability to discipline management and push for changes when management
performs poorly. $he second assumption is that institutional investors prefer high dividends
relative to individual investors due to mainly the ta# effects.
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C&$(ter 9 . E"(iric$* Rese$rc& on
Dividend Decisions
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A=TO SECTOR
1. Hero Hond$
A0nor"$* Return @PriceA: @In Percent$-eA
Ti"e ?indo8 Cu". A0. Vo*u"e
4)-28 $A 4)-83 -11.63%
4)-38 $A 4)-3 2.32%
4) -13.39%
4)P3--3 -2.12%
-0.57%
P3-P38 0.49%
P3-P28 6.93%
ean )aily 4b. 0eturn 0.05%
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Interpretation
We can see that before announcement date of dividend within the period of 28 days there was
huge abnormal effect on price. $his might be because of leakeage of insider information. >efore
ten days of announcement date there was a sharp rise in prices. &rices tend to fluctuate during the
period between 4) to . >ut after effective date nominal changes took place in price. >ut no
positive cumulative returns are generated. *o investors have to think before they invest in this
company.
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A0nor"$* Return @Vo*u"eA:
.
o
4)-28 to 4)-3 AD-16
to AD-1
AD ADC1 to ED-1 ED EDC1 to
EDC16
EDC1 to
EDC)6
3 'um.
4>
6,E22.6F KFF.H1 3I6.HE 6K,F6I,3HI.H1 2H2,KHH.68 2,FIH,H32.2I K,811,1EH.HH
6 )ays 28 38 3 12 3 38 28
2 4ve.
)aily
4>
(3Q6)
K3.33 KF.FK 3I6.HE 1E83H2.68 2H2KHH.3I 2FIHH3.2E 6FK13K.6F
E 4ve.
Rol.
I32.K8
1 4>Q4ve
(2QE)
8.8I 8.8I 8.63 200.83 E8I.3E E8E.F1 6I2.K1
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Inter(ret$tion
$he above chart and table suggest that there is abnormality in the volume to considerable e#tent.
$ill announcement date there was no huge volume of trade taking place. >ut after announcement
date the volume trading goes on increasing. An announcement date there was fall in price of the
script but after 4) price went on increasing and also the volume was increasing. An
ma#imum volume of trading took place and sharp rise in price was also seen on that date. $his
indicates the impact of distribution of dividend news on stock market. Gowever after that the
volume trading went on decreasing as well price after P28 has shown a rising trend
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. M$ruti Su>u'i
A0nor"$* Return @PriceA: @In Percent$-eA
Ti"e ?indo8 Cu". A0. Vo*u"e
4)-28 $A 4)-83 -16.78%
4)-38 $A 4)-3 -9.31%
4) -1.50%
4)P3--3 -31.58%
0.24%
P3-P38 -0.78%
P3-P28 -0.68%
ean )aily 4b. 0eturn -0.30%
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Inter(ret$tion
We can find that there is a perfect negative trend line in the price effect chart. $he 'um 4>
returns are falling. Gowever on 4nnouncement date a positive rise was seen in price of script but
after that again it went on reducing. 4gain on during period near there was nominal rise in
prices but after that it went on fluctuating and after ten days of there was fall in price and
after that it again had rise. *o we can interpret that announcement and effective dates had a short
term impact on price but after that price always decreased. $his shows the bearish trend in
market has affected the script. $his might be due to high positive beta of the script. Gowever this
is not a good script for the investors to invest as it does not generate positive abnormal returns.
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A0nor"$* Return @Vo*u"eA:
N
o
AD-)6 to
AD-1
AD-16 to
AD-1
AD ADC1 to ED-1 ED EDC1 to
EDC16
EDC1 to
EDC)6
3 'um. 4> -3,FH8,FHI.82 -E81,26K.FI 6H6,I68.8
1
-3E,8HK,I16.I1 -63K,IK3.I1 -3,26K,I8F.1I -
6,IH6,3EI.K
6
6 )ays 28 38 3 328 3 38 28
2 4ve.
)aily 4>
(3Q6)
-11FKI.288K1 -E8126.KFI62 6H6I68.81
32
-6F1FE8.F63H -63KIK3.IEKH -326KI8.F1I -
II8H3.FF8F
K
E 4ve. Rol. 266EKK.IEK
H
1 4>Q4ve
(2QE)
-8.3H -8.32 8.K1 -8.2E -8.FK -8.E3 -8.23
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see positive abnormal volume on announcement date but after that the volume has shown a
decreasing trend. >efore announcement date also there was a negative abnormal volume in script.
>ut on announcement date ma#imum volume of trade took place and even there was increase in
price of script on announcement date. $his is due to the news of declaration of dividend. We can
say that the move of declaring dividend has not been able to generate either positive abnormal
volume or positive cum 4> return for the investors
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
). T$t$ Motors
A0nor"$* Return @PriceA: @In Percent$-eA
Ti"e ?indo8 Cu". A0. Vo*u"e
4)-28 $A 4)-83 -26.62%
4)-38 $A 4)-3 2.00%
4) -3.85%
4)P3--3 17.09%
-1.22%
P3-P38 16.13%
P3-P28 25.56%
ean )aily 4b. 0eturn 0.11%
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can observe a positive 'um 4> return before 28 days of announcement date. >ut before 38
days of announcement date there was sharp fall in the price. Gowever after that again had rise
but for very short period and again on announcement date there was no positive effect on price.
4fter announcement date there was nominal rise in price but again it followed a declining trend.
>ut after effective date price started increasing and showed a positive trend. It generated positive
cumulative abnormal return after effective date. $his chart shows positive trend in price of script.
Investors have positive e#pectation about this script so that dividend and other factors in market
are not able to change their e#pectations. $hus we can say that it is good script to invest.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA:
N
o
AD-)6 to
AD-1
AD-16 to
AD-1
AD ADC1 to ED-1 ED EDC1 to
EDC16
EDC1 to
EDC)6
3 'um. 4> -
139919.6
3
-40050.05 2902.8
7
-
162581.92
357.87 131518.9
5
179215.
97
6 )ays 28 38 3 12 3 38 28
2 4ve.
)aily 4>
(3Q6)
-4663.99 -4005.01 2902.8
7
-3067.58 357.87 13151.89 5973.87
E 4ve. Rol. 21016.1
3
1 4>Q4ve
(2QE)
-0.22 -0.19 0.14 -0.15 0.02 0.63 0.28
Inter(ret$tion
We can see that there has been a positive effect on volume on announcement and effective date.
Gowever during the period between to P38 there was ma#imum effect on volume. )uring
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
that time period price also showed a continuous rise. $hough after 38 days of effective date there
was a decline seen volume but the price still had shown the rising trend. >ut still it generates a
positive abnormal volume effect. $his indicates a signal of removal of abnormality in the script
volume.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
7ANGED SECTOR
,. *>I >ank
A0nor"$* Return @PriceA: @In Percent$-eA
Ti"e ?indo8 Cu". A0. Vo*u"e
4)-28 $A 4)-83 7.47%
4)-38 $A 4)-3 -2.30%
4) -2.15%
4)P3--3 0.70%
-2.87%
P3-P38 10.73%
P3-P28 14.49%
ean )aily 4b. 0eturn 13.28%
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can view that before the dividend was announced there was a negative 'um.4>. 0eturn. $his
chart indicates that on announcement date and effective date the script gave ma#imum negative
'um. 4> return. >ut after announcements and effective dates there was a positive cumulative
abnormal return generated. !rom this chart thus we can generate that this generates positive
cum.4>. 0eturns for the investors. *o this is good script to invest in.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA:
N
o
AD-)6 to
AD-1
AD-16 to
AD-1
AD ADC1 to ED-1 ED EDC1 to
EDC16
EDC1 to
EDC)6
3 'um. 4> -3,F86,IK2.63 -3,K6H,IHF.23 2F8,2FK.6
K
-E,EI6,12F.8K -2F2,63K.H6 -6,I31,F38.HE -
I,82E,F3I.H
I
6 )ays 28 38 3 6K 3 38 28
2 4ve.
)aily 4>
(3Q6)
-12E26.HH -3K6HIH.F2 2F82FK.6K -KEHFE.K2 -2F263K.H6 -6I31F3.8H -283312.II
E 4ve. Rol. 382FIF6.H6
1 4>Q4ve
(2QE)
-8.81 -8.3K 8.21 -8.31 -8.21 -8.6K -8.6I
Inter(ret$tion
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
4s we see that there is a big amount of positive abnormality in volume on announcement date.
$his could be due to great amount of li,uidity in script and price could be such that small investors
tempted to invest in it. >ut there is fall in 4> volume after announcement date. 4fter annocement
date the volume has decreased. oreover the price chart also indicates the positive return. $his
shows that the decrease in volume is due to the few buyers who are ready to buy this share at higher
price.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
.. ICICI 7$n'
A0nor"$* Return @PriceA: @In Percent$-eA
Ti"e ?indo8 Cu". A0. Vo*u"e
4)-28 $A 4)-83 -8.95%
4)-38 $A 4)-3 -3.81%
4) -8.95%
4)P3--3 -7.44%
-6.15%
P3-P38 13.88%
P3-P28 19.57%
ean )aily 4b. 0eturn 0.11%
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see that before the dividend was announced the script generated negative 'um.4>.
0eturn. >ut before 38 days of announcement date a sharp rise in price was seen. $his might be
due to the inside information leakage. An announcement date again there was a negative
cumulative abnormal return but after that the script generated good positive return. *o we can
say that the declaration of news of announcement and effective date generated positive returns
for the company. 4lso we can infer from the chart that there as positive trends in price of
company. $hus this is the good script to invest in for the investors.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA:
No
AD-30 TO
AD-
AD-0
TO AD-
AD
AD! TO
ED- ED
ED! TO
ED!0
ED! TO
ED!30
"
CUM.
AB
16987202
.77
-
999433.
85
3814968.
69
-
32821128
.23
-
14163260
.08
-
17125798
.15
48899142
.77
#" DAYS 30.00 10.00 1.00 44.00 1.00 10.00 30.00
3"
AVE.DAI
LY AB
(1/2)
566240.0
9
-
99943.3
8
3814968.
69
-
619266.5
7
-
14163260
.08
-
1712579.
82
1629971.
43
$"
AVE.VO
L.
4281562.
31
%"
AB/AVE
(3/4) 0.13 -0.02 0.89 -0.17 -3.31 -0.40 -0.38
Inter(ret$tion
We can see that there is abnormality generated in volume on announcement and effective date. An
announcement date the script generated highest positive cum. 4>. 0eturn and on effective date it
generated highest negative cum.4>. 0eturn. Gowever when we compare it with price effects. We
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
can see that inverse relation is there. $hough the share price is rising but the investors are not ready
to purchase at high price. 4nd more of selling has taken place. )ue to this negative abnormal
volume is created.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
2. HD!C 7$n'
A0nor"$* Return @PriceA: @In Percent$-eA
Ti"e ?indo8 Cu". A0. Vo*u"e
AD-30 TO AD-01 7.61%
AD-10 TO AD-1 3.29%
AD -2.15%
AD1-ED-1 10.05%
ED 0.44%
ED1-ED10 -4.63%
ED1-ED30 -7.85%
M!"# D"$%& A'. (!)*+# 0.06%
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see from the above chart that there was a negative abnormal return in the script before 28
days of the announcement date. >ut after that it is generating positive cum abnormal return till
the period nearer to effective date. >ut in the remaining half period between 4) to the prices
started declining. 4fter the effective date it again showed a rising trend. $his indicates that after
the effective date the investors would have shown more interest in selling of shares. !rom the
above chart we can interpret that no drastic effect has been seen on announcement date and
effective date.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA:
No
AD-)6
TO AD-1
AD-16 TO
AD-1 AD
ADC1 TO
ED-1 ED
EDC1 TO
EDC16
EDC1 TO
EDC)6
1 C=M. A7
-
H2I68I.I6 -161I68.8K
-
38I3E6.31 FH36F68.88 -6FH6EK.31
-
3IIKK28.62 -EH2883K.2K
DAYS 28.88 38.88 3.88 12.88 3.88 38.88 28.88
)
AVE.DAILY A7
@1EA -6EFE8.22 -161I6.83
-
38I3E6.31 36FF12.63 -6FH6EK.31 -3IIKK2.86 -31HFFH.6K
, AVE.VOL. 2F1838.31
. A7EAVE @)E,A -8.8H -8.3E -8.28 8.21 -8.H2 -8.11 -8.E2
Inter(ret$tion
We can see from the above chart that on announcement date and effective date there was a
negative cumulative abnormal volume generated. )uring that time price was also rising. >ut on
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
the effective date price had rise to ma#imum level. 4t that time even the ma#imum abnormal
volume was also generated. !rom this we can interpret that investors were waiting for the
effective distribution date. 4fter the distribution of dividend investors started selling of their
shares and the abnormality began to reduce gradually after the effective dividend distribution
date.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
CAPITAL /OODS SECTOR
3. 7HEL Ltd.
A0nor"$* Return @PriceA: @In Percent$-eA
Ti"e ?indo8 Cu". A0. Vo*u"e
4)-28 $A 4)-83 8.369
4)-38 $A 4)-3 3.189
4) 8.839
4)P3--3 33.E19
-3.3I9
P3-P38 -6.EK9
P3-P28 -6.EK9
ean )aily 4b. 0eturn 8.8E9
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see from the above chart that before one month of announcement date the script
generated positive cum abnormal return. >ut during the period between 4) 28 to 4) 38 there
was negative effect on price. 4fter that price it had again shown a rising trend from the period
between 4) 38 to 38. $his indicates that during this time period investors had shown more
interest in purchasing the script. 4fter the 38 days of effective dividend distribution date again
the negative effect on the price was seen. $his indicates that after the effective distribution date
share holders began to sell of the scripts.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA:
N
o
AD-)6 TO
AD-1
AD-16 TO
AD-1 AD
ADC1 TO
ED-1 ED
EDC1 TO
EDC16
EDC1 TO
EDC)6
C=M. A7 -3266286.23 -2IE12.HH -3F1F1K.32
-
381816H8.IH
-
338H63.32 -IKIEK8.I8
-
2IE1E61.1F
# DAYS 28.88 38.88 3.88 12.88 3.88 38.88 28.88
3
AVE.DAILY
A7 @1EA -EE8HF.HE -2IE1.2K -3F1F1K.32 -3IK636.FF
-
338H63.32 -IKIEK.8I -32313E.3I
$ AVE.VOL. 26186H.32
%
A7EAVE
@)E,A -8.3E -8.83 -8.13 -8.F3 -8.2E -8.28 -8.E8
Inter(ret$tion
We can observe from the above chart that the script generated overall negative cumulative
abnormal return for the share holders. An the announcement date ma#imum abnormal volume
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
was there. $his is because of announcement of dividend. /ots of intra day trading would have
taken place on this day. 4nd this might be one of the reason for huge abnormality in volume on
that day. >efore the announcement date script volume effect tend to react in normal manner. >ut
after the drastic impact on volume on the announcement date it again tried to rise and become
normal. With the rising prices investors had shown more interest in selling the shares and there
by earn the short term gains.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
4. L H T Ltd.
A0nor"$* Return @PriceA: @In Percent$-eA
Ti"e ?indo8 Cu". A0. Vo*u"e
4)-28 $A 4)-83 -8.F89
4)-38 $A 4)-3 6.E89
4) 8.KE9
4)P3--3 -38.8H9
6.819
P3-P38 -8.HK9
P3-P28 -K.6H9
ean )aily 4b. 0eturn -8.369
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see from the above chart that before the announcement date script generated positive
cumulative abnormal return. 4gain during the period from announcement date to effective date
there was a rising trend. >ut after the effective date the script again began to generate negative
cumulative abnormal return. $his indicates that large amount of buying took place during the
period upto the effective date. >ut after the dividend were distributed the investors started selling
their shares. $his created a huge selling pressures and due to this price had come down.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA:
No
AD-)6
TO AD-
1
AD-16
TO AD-
1 AD
ADC1
TO ED-
1 ED
EDC1
TO
EDC16
EDC1 TO
EDC)6
C=M. A7 HEIK.KE EF16.38 F6K.F3 E2I8E.EI HFE.1F FF11.68 3II86.EK
# DAYS 28.88 38.88 3.88 K8.88 3.88 38.88 28.88
3
AVE.DAILY A7
@1EA 6EI.IF EF1.63 F6K.F3
548.81
HFE.1F FF1.16 FF2.E6
$ AVE.VOL. H32.3I
% A7EAVE @)E,A 8.21 8.F1 8.KK 8.HH 3.8H 8.I2 8.I2
Inter(ret$tion
We can see from the above chart that this script generated a good positive cumulative abnormal
return. >efore the announcement date it tend to be high. An the effective date it generated
ma#imum positive cum abnormal volume. $his indicates that lots of intra day trading would
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
have taken place on that day. Gowever in overall sense it creates positive cumulative abnormal
return and it can be considered a good script to invest.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
5. 7EML LTD
A0nor"$* Return @PriceA: @In Percent$-eA
Ti"e ?indo8 Cu". A0. Vo*u"e
4)-28 $A 4)-83 3.H19
4)-38 $A 4)-3 -3.KH9
4) 31.HI9
4)P3--3 -13.169
-3.E39
P3-P38 -K.KF9
P3-P28 -68.269
ean )aily 4b. 0eturn -8.E39
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
!rom the above
chart we can see
that before
announcement date
the script generated
positive cumulative
abnormal return. >ut after announcement date the price showed a negative trend. 4gain on
effective date it had shown some rise but immediately after that it began to fall down. $his shows
that there is positive impact of declaration of announcement date and effective date.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA:
N
o
AD-)6
TO AD-1
AD-16
TO AD-1 AD
ADC1 TO
ED-1 ED
EDC1 TO
EDC16
EDC1 TO
EDC)6
'7. 4> 621H26.KE
-
KHK36.3I
-
6F3FE.KF 33K128.H8
-
33F6H.KF
-
36KF86.3I
-
E3KHE8.1H
# )4M* 28.88 38.88 3.88 HH.88 3.88 38.88 28.88
3
4R:.)4I/M
4> (3Q6) HK1H.HF -KHK3.66
-
6F3FE.KF 312I.2F
-
33F6H.KF -36KF8.66 -32I1K.86
$ 4R:.RA/. EF166.KF
%
4>Q4R:
(2QE) 8.3H -8.3I -8.1F 8.82 -8.61 -8.6K -8.28
Inter(ret$tion
!rom the above chart we can see that on announcement date huge amount of abnormality was seen
in the script. >efore one month of announcement date the script generated positive cum 4> return
but again on effective date abnormality was seen in the script and after that it continued in the
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
entire event period. Ane have to think before investing in this script because it generates negative
cum 4> 0eturn.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
HEALTH CARE SECTOR
16. A(o**o Hos(it$*s
A0nor"$* Return @PriceA: @In Percent$-eA
$ime Window 'um. 4b. Rolume
4)-28 $A 4)-83 F.IE9
4)-38 $A 4)-3 3F.FF9
4) -F.F89
4)P3--3 -6F.329
-8.619
P3-P38 -F.6H9
P3-P28 -I.629
ean )aily 4b. 0eturn -8.239
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see from the above chart that before announcement date the script gives negative
cumulative abnormal return. An announcement date it gave positive cumulative abnormal return.
>ut after that the script gave negative cumulative return upto the P38. 4fter that it had again
start rising. Gowever the overall the script generates negative cum abnormal return.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA:
No
AD-30
TO AD-

AD-0
TO
AD- AD
AD!
TO
ED- ED
ED!
TO
ED!
0
ED!
TO
ED!30
CUM. AB
24492.
99
16414.
44
-
8997.
39
-
1818.
58
-
12307.
39
62890.
03
21368.
20
# DAYS 30.00 10.00 1.00 50.00 1.00 10.00 30.00
3
AVE.DAILY
AB (1/2) 816.43
1641.4
4
-
8997.
39
-
36.37
-
12307.
39
6289.0
0 712.27
$ AVE.VOL.
17917.
39
% AB/AVE (3/4) 0.046 0.092
-
0.502
-
0.002 -0.687 0.351 0.040
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
!rom the above chart we can see that before announcement date script generated positive
cumulative return. >ut on and after announcement date upto effective date it generated negative
cumulative abnormal return. $his suggests that before announcement date ma#imum transaction
took place. )uring the period form announcement date to effective date the volume of
transaction was very low. $his means that investors were waiting for the distribution of dividend.
>ut after effective date again it stated generating positive cumulative abnormal return. It means
that investors started selling their shares after earning dividend income. $his increased the
volume of transactions and thereby generated positive cumulative abnormal return which is in
the interest of shareholders.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
11. Sie"ens He$*t&
A0nor"$* Return @PriceA: @In Percent$-eA
Ti&e 'in(o) C*&" A+" Vo,*&e
AD-30 TO AD-01 16.26%
AD-10 TO AD-1 26.02%
AD -3.59%
AD1-ED-1 -3.33%
ED -1.63%
ED1-ED10 7.19%
ED1-ED30 10.76%
M!"# D"$%& A'. (!)*+# 0.17%
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
!rom the above chart we can see that before announcement date the script generated negative
cumulative abnormal return, but before ten days of announcement date the price had drastically
rose. >ut after that it had noticed a sudden fall. !rom effective date onwards again it began to
rise and generate positive cumulative abnormal return. Averall this script generates positive cum
abnormal return. $his is good script to invest in.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA:
N
o
AD-30
TO AD-
AD-0
TO AD-
AD
AD!
TO
ED- ED
ED!
TO
ED!
0
ED!
TO
ED!30
CUM. AB -2601.59
-
52440.4
1
679.
56
65912.
74
-
55.4
4
5812.
38
19585.
85
# DAYS 30.00 10.00 1.00 51.00 1.00 10.00 30.00
3
AVE.DAILY AB
(1/2) -86.72 -5244.04
679.
56
1292.4
1
-
55.4
4
581.2
4 652.86
$ AVE.VOL.
1011.4
4
% AB/AVE (3/4) -0.09 -5.18 0.67 1.28
-
0.05 0.57 0.65
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
we can see from the above chart that on announcement date there was a big cumulative abnormal
return. >ut on effective date there was no such effect and the volume was not so abnormal to a
large e#tent. Averall the script generated positive cumulative abnormal return. &ositive
cumulative abnormal return is considered a good criteria for investment. $his script generates
good cumulative positive abnormal return. *o it is good script to invest.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
1. O(to Circuits
A0nor"$* Return @PriceA: @In Percent$-eA
Ti&e 'in(o) C*&" A+" Vo,*&e
AD-30 TO AD-01 11.95%
AD-10 TO AD-1 -14.46%
AD 6.03%
AD1-ED-1 -24.56%
ED -1.95%
ED1-ED10 -5.09%
ED1-ED30 -8.16%
M!"# D"$%& A'. (!)*+# -0.21%

[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
!rom the above chart we can see that the script generated positive cumulative return before
announcement date. >ut declaration of announcement of dividend created a negative effect. 4fter
that it went on decreasing. Averall this script generated negative cum abnormal return. It is not a
good company to invest as it generates negative cum abnormal return.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA:
N
o
AD-30
TO AD-
AD-0
TO AD- AD
AD! TO
ED- ED
ED!
TO
ED!0
ED!
TO
ED!30

CUM"
A-
-
3745014.
28
-
3591132.
36
-
344507.
79
-
13914872
.87
-
437621.
79
-
2590964.
97
-
7810699.
10
# DAYS 30.00 10.00 1.00 89.00 1.00 10.00 30.00
3
AVE"DA
ILY A-
./#0
-
124833.8
1
-
359113.2
4
-
344507.
79
-
156346.8
9
-
437621.
79
-
259096.5
0
-
260356.6
4
$
AVE"VO
L"
722137.7
9
%
A-/AVE
.3/$0 -0.17 -0.50 -0.48 -0.22 -0.61 -0.36 -0.36
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
!rom the above chart we can observe that the script generated a huge negative cumulative
abnormal return. An effective date also the script generated huge negative cumulative abnormal
return. Averall the script generated negative cumulative return throughout the event period which
is against the interest on the investors. *o we can say that this is not a good script to invest.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
!MC/ SECTOR
1). Co*-$te P$"o*ive
A0nor"$* Return @PriceA: @In Percent$-eA
Ti&e 'in(o) C*&" A+" Vo,*&e
AD-30 TO AD-01 8.49%
AD-10 TO AD-1 1.65%
AD 0.64%
AD1-ED-1 -10.79%
ED -1.11%
ED1-ED10 -1.88%
ED1-ED30 -4.00%
M!"# D"$%& A'. (!)*+# -0.05%
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
!rom the above chart we can see that the script generated negative cumulative abnormal return.
>ut starting from before ten days of announcement date the script started generating positive
cumulative abnormal return. Ane of the reason for this might be the leakage of insider
information which might have cause such a price hike. >ut again starting from before few days
of effective date of dividend it again began to fall downwards. Averall the script generated
negative cumulative abnormal return. *o this is not a good script to invest in.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA:
N
o
AD-30
TO AD-
AD-0
TO AD-
AD
AD!
TO ED- ED
ED!
TO
ED!0
ED!
TO
ED!30

CUM"
A-
-
1177893.
23
-
187461.
72
45185.
53
-
1594751.
70
-
102838.
47
-
822364.
72
-
1795212.
23
# DAYS 30.00 10.00 1.00 33.00 1.00 10.00 30.00
3
AVE"DA
ILY A-
./#0
-
39263.11
-
18746.1
7
45185.
53
-
48325.81
-
102838.
47
-
82236.4
7
-
59840.41
$
AVE"VO
L"
116674.4
7
%
A-/AVE
.3/$0 -0.34 -0.16 0.39 -0.41 -0.88 -0.70 -0.51
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
!rom the above chart we can see that the script generated positive cumulative abnormal return on
announcement date. >ut again on effective date it again generated a huge negative cumulative
abnormal return. We can say that ma#imum intraday trading might have taken place on
announcement date with the declaration of news. Averall the script have generated negative
cumulative abnormal return which is not good on the part of the investors. *o this is not the good
script to invest.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
1,. H=L Ltd
A0nor"$* Return @PriceA: @In Percent$-eA
Ti&e 'in(o) C*&" A+" Vo,*&e
AD-30 TO AD-01 3.75%
AD-10 TO AD-1 -0.46%
AD -1.78%
AD1-ED-1 11.52%
ED -0.59%
ED1-ED10 6.65%
ED1-ED30 18.15%
M!"# D"$%& A'. (!)*+# 0.33%
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
!rom the above chart we can observe that the script generated negative cumulative abnormal
return in the beginning but on announcement date there was a cumulative positive abnormal
return. $ill the effective date no such huge abnormal changes were apperent in price effect but
starting from few days of effective date there was a drastic positive change in price effect and it
generated a huge positive cumulative abnormal return for the shareholders. $his is good on part
of investors. *o it is good script to invest.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA:
N
o
AD-30
TO AD-

AD-0
TO AD-
AD
AD!
TO ED-
ED
ED!
TO
ED!0
ED!
TO
ED!30
CUM" A-
-
170726
0.62
-
101437
3.77
142121
.85
539240
.46
-
345653
.15
-
208049
9.92
-
633988
4.23
# DAYS 30.00 10.00 1.00 31.00 1.00 10.00 30.00
3
AVE"DAIL
Y A-
./#0
-
56908.6
9
-
101437.
38
142121
.85
17394.
85
-
345653
.15
-
208049.
99
-
211329.
47
$
AVE"VOL
"
578620.
15
%
A-/AVE
.3/$0 -0.10 -0.18 0.25 0.03 -0.60 -0.36 -0.37
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see from the above chart that the script generated positive cumulative abnormal return on
announcement date. >ut on effective date a huge negative cumulative abnormal return. >ut overall
abnormal return generated from the pro"ect is negative. .egative abnormal return is not in the
interest of the investors. >ut the price effect is positive.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]

1.. D$0ur Indi$ Ltd
A0nor"$* Return @PriceA: @In Percent$-eA
Ti&e 'in(o) C*&" A+" Vo,*&e
AD-30 TO AD-01 2.39%
AD-10 TO AD-1 1.49%
AD 0.95%
AD1-ED-1 0.02%
ED 1.12%
ED1-ED10 3.76%
ED1-ED30 3.64%
M!"# D"$%& A'. (!)*+# 0.05%
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see from the above chart that in the beginning the script generated positive cumulative
abnormal return. >ut in the period between before 4) 28 to 4) 38 it generated negative
cumulative abnormal return. An announcement date it again fell down till the effective date.
4fter that it again rose and generated positive cumulative abnormal return. Averall return
generated from the script is positive so it is good script to invest in.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA:
N
o
AD-30
TO AD-

AD-0
TO AD-
AD
AD!
TO ED- ED
ED!
TO
ED!0
ED!
TO
ED!30
CUM" A-
163908
9.10
186074
4.93
559583
.56
1178749
2.44
58671
.56
869090
.49
193261
5.34
# DAYS 30.00 10.00 1.00 60.00 1.00 10.00 30.00
3
AVE"DAIL
Y A-
./#0
54636.3
0
186074.
49
559583
.56
196458.
21
58671
.56
86909.
05
64420.5
1
$ AVE"VOL"
84381.4
4
%
A-/AVE
.3/$0 0.65 2.21 6.63 2.33 0.70 1.03 0.76
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
!rom the above chart we can observe that the script generated ma#imum cumulative abnormal
return on announcement date. Ane of the reason for such a drastic rise in cumulative abnormal
volume might be that lots of intraday trading might have taken place on that day. >ut after
announcement it began to reduce and get normali=ed over the event time period. Gowever
overall the script generated positive cumulative abnormal return. $his is good on the part of
investors. It is good script to invest in.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
IT SECTOR
12. Tcs Ltd
A0nor"$* Return @PriceA: @In Percent$-eA
Ti&e 'in(o) C*&" A+" Vo,*&e
AD-30 TO AD-01 -19.47%
AD-10 TO AD-1 -13.23%
AD -0.92%
AD1-ED-1 -10.31%
ED -51.54%
ED1-ED10 2.97%
ED1-ED30 10.37%
M!"# D"$%& A'. (!)*+# -0.22%
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see that before the 4nnouncement )ate of )ividend, there was a big negative
'umulative 4bnormal 0eturn. $he return is somewhat better on the 4nnouncement )ate. >ut the
period between the day after the 4nnouncement )ate and a day before the :#-dividend date,
there was a negative return. >ut on the :#-dividend date the script reached at the bottom,
generating a negative 'umulative 4bnormal 0eturn of 13.1E9. $his negative return is due to the
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
heavy selling on the :#-dividend date. 4fter the e#-dividend date, the script has generated a
return in positive. $he return has increased subse,uently
A0nor"$* Return @Vo*u"eA:
N
o
AD-30
TO
AD-
AD-0
TO
AD- AD
AD!
TO ED-
ED
ED!
TO
ED!0
ED!
TO
ED!30
CUM. AB
63726
5.67
69122
4.33
76835
9.67
618898
2.67
21148
3.67
148726
8.33
450147
7.67
# DAYS 30.00 10.00 1.00 55.00 1.00 10.00 30.00
3
AVE.DAILY
AB (1/2)
21242.
19
69122.
43
76835
9.67
112526.
96
21148
3.67
148726.
83
150049.
26
$ AVE.VOL.
223657.
33
%
AB/AVE
(3/4) 0.09 0.31 3.44 0.50 0.95 0.66 0.67
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Interpretation
We can see that there is a big amount of abnormality in the volume on the 4nnouncement )ate.
$his could be due to huge selling pressure on the 4nnouncement )ate. $he 4bsolute volume
rises gradually before the 4nnouncement )ate and reaches on a high peak on the 4nnouncement
)ate. 4fter the 4nnouncement of )ividend, the 4bsolute volume falls down slowly. $his
indicates that on the 4nnouncement )ate, there must have been some adverse impact on the
investors so that the volume had been shot up. In all, we can see that there e#ist abnormality in
the volume due to poor return generated by the script.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
13. In#osis *td.
A0nor"$* Return @PriceA: @In Percent$-eA
Ti&e 'in(o) C*&" A+" Vo,*&e
AD-30 TO AD-01 11.95%
AD-10 TO AD-1 -14.46%
AD 6.03%
AD1-ED-1 -24.56%
ED -1.95%
ED1-ED10 -5.09%
ED1-ED30 -8.16%
M!"# D"$%& A'. (!)*+# -0.21%
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Interpretation
We can see that before the 4nnouncement )ate of )ividend, there was a big positive 'umulative
4bnormal 0eturn. $he return has somewhat worsened on the 4nnouncement )ate. $he return
has turned negative on the 4nnouncement date. >ut the situation after the 4nnouncement date
has been somewhat good till the e#-dividend date. >ut on the e#-dividend date, the return has
also worsened. >ut then after, the returns have reached its peak. *o this is a good script to invest
in.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA:
N
o
AD-30
TO
AD-
AD-0
TO
AD- AD
AD!
TO
ED- ED
ED!
TO
ED!0
ED!
TO
ED!30
CUM. AB
-
237499
.68
-
226313
.76
-
142094
.39
-
343275
.42
-
116541
.39
-
866006
.16
-
198619
1.08
# DAYS 30.00 10.00 1.00 49.00 1.00 10.00 30.00
3
AVE.DAILY
AB (1/2)
-
7916.6
6
-
22631.
38
-
142094
.39
-
7005.6
2
-
116541
.39
-
86600.
62
-
66206.3
7
$ AVE.VOL.
225166.
39
%
AB/AVE
(3/4) -0.04 -0.10 -0.63 -0.03 -0.52 -0.38 -0.29
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see that there is a big amount of abnormality in the volume on the 4nnouncement )ate.
$his could be due to huge selling pressure on the 4nnouncement )ate. $he script has generated a
negative return prior to the 4nnouncement )ate, but it became more negative on the
4nnouncement )ate. $he script generated negative returns during the entire period of study
e#cept on the e#-dividend date.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
14. ?i(ro Ltd
A0nor"$* Return @PriceA: @In Percent$-eA
Ti&e 'in(o) C*&" A+" Vo,*&e
AD-30 TO AD-01 -11.30%
AD-10 TO AD-1 -8.01%
AD 3.61%
AD1-ED-1 -14.97%
ED -2.43%
ED1-ED10 5.38%
ED1-ED30 13.34%
M!"# D"$%& A'. (!)*+# -0.09%
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ert$tion
We can see that before the 4nnouncement date of dividend, there was a big negative 'umulative
4bnormal 0eturn. $he return is somewhat better on the 4nnouncement )ate. >ut immediately
after the announcement date the returns had fallen sharply. $his indicates that on the
announcement date, there must have been some adverse impact on the investors because of
which the returns have fallen down. $he situation has improved on the e#-dividend date and
thereafter. *o it is a good script to invest in.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA:
N
o
AD-
30
TO
AD-
AD-0
TO
AD- AD
AD!
TO ED-
ED
ED!
TO
ED!0
ED!
TO
ED!30
CUM. AB
-
6013.
45
945322
.95
684291
.66
484089
9.61
-
112800
.34
-
105851
5.74
729500
.47
# DAYS 30.00 10.00 1.00 67.00 1.00 10.00 30.00
3
AVE.DAILY
AB (1/2)
-
200.4
5
94532.
29
684291
.66
72252.2
3
-
112800
.34
-
105851.
57
24316.
68
$ AVE.VOL.
238753
.34
%
AB/AVE
(3/4) 0.00 0.40 2.87 0.30 -0.47 -0.44 0.10
Inter(ret$tion
We can see that there is a big amount of abnormality in the volume on the 4nnouncement )ate.
$his could be due to huge selling pressure on the 4nnouncement )ate. $he 4bsolute volume
rises gradually before the 4nnouncement )ate and reaches on a high peak on the 4nnouncement
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
)ate. 4fter the 4nnouncement of )ividend, the 4bsolute volume falls down slowly. $his
indicates that on the 4nnouncement )ate, there must have been some adverse impact on the
investors so that the volume had been shot up. In all, we can see that there e#ist abnormality in
the volume due to poor return generated by the script.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
METAL SECTOR
15. Ster*ite Indi$ Ltd.
A0nor"$* Return @PriceA: @In Percent$-eA
Ti&e 'in(o) C*&" A+" Vo,*&e
AD-30 TO AD-01 -22.32%
AD-10 TO AD-1 -6.43%
AD -3.32%
AD1-ED-1 -56.19%
ED -4.12%
ED1-ED10 -4.09%
ED1-ED30 -4.86%
M!"# D"$%& A'. (!)*+# -0.53%
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see that before the 4nnouncement date of dividend, there was a big negative 'umulative
4bnormal 0eturn. $he return is somewhat better on the 4nnouncement )ate. >ut immediately
after the announcement date the returns had fallen sharply. $his indicates that on the
announcement date, there must have been some adverse impact on the investors because of
which the returns have fallen down.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA:
N
o
AD-30
TO AD-

AD-0
TO
AD- AD
AD!
TO
ED- ED
ED!
TO
ED!0
ED!
TO
ED!30
CUM. AB
247271
5.67
-
53496
1.85
-
20188
1.64
43570
6.46
-
46172
4.64
-
329175
7.49
-
743167
2.54
# DAYS 30.00 10.00 1.00 138.00 1.00 10.00 30.00
3
AVE.DAILY
AB (1/2)
82423.8
6
-
53496.
18
-
20188
1.64
3157.2
9
-
46172
4.64
-
329175.
75
-
247722.
42
$ AVE.VOL.
956294.
64
%
AB/AVE
(3/4) 0.09 -0.06 -0.21 0.00 -0.48 -0.34 -0.26
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see that there is a big amount of abnormality in the volume on the 4nnouncement )ate.
$his could be due to huge selling pressure on the 4nnouncement )ate. $he script generated a
positive volume 28 days prior to the 4nnouncement )ate. $hen 3 day after the 4nnouncement
)ate and 3 day prior to the e#-dividend date, the script generated positive cumulative abnormal
volume. An the other days, there was a negative cumulative abnormal volume generated by the
script.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
6. HindIinc Ltd.
A0nor"$* Return @PriceA: @In Percent$-eA
Ti&e 'in(o) C*&" A+" Vo,*&e
AD-30 TO AD-01 -5.05%
AD-10 TO AD-1 -5.33%
AD -0.75%
AD1-ED-1 -24.43%
ED -2.50%
ED1-ED10 1.64%
ED1-ED30 -8.80%
M!"# D"$%& A'. (!)*+# -0.29%
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(et$tion
We can see that before the 4nnouncement date of dividend, there was a big negative 'umulative
4bnormal 0eturn. $he return is somewhat better on the 4nnouncement )ate. >ut immediately
after the announcement date the returns had fallen sharply. $his indicates that on the
announcement date, there must have been some adverse impact on the investors because of
which the returns have fallen down.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA:
N
o
AD-30
TO AD-

AD-0
TO AD-
AD
AD!
TO ED-
ED
ED!
TO
ED!
0
ED!
TO
ED!30
CUM" A-
-
547039
.00
-
324809
.08
-
55979
.85
-
144567
9.69
-
58012
.85
-
40529
.77
-
860385
.46
# DAYS 30.00 10.00 1.00 97.00 1.00 10.00 30.00
3
AVE"DAILY
A- ./#0
-
18234.
63
-
32480.
91
-
55979
.85
-
14903.9
1
-
58012
.85
-
4052.
98
-
28679.
52
$ AVE"VOL"
88401.
85
%
A-/AVE
.3/$0 -0.21 -0.37 -0.63 -0.17 -0.66 -0.05 -0.32
Inter(ert$tion
We can see that there is a big amount of abnormality in the volume on the 4nnouncement )ate.
$his could be due to huge selling pressure on the 4nnouncement )ate. $he 4bsolute volume
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
rises gradually before the 4nnouncement )ate and reaches on a high peak on the 4nnouncement
)ate. 4fter the 4nnouncement of )ividend, the 4bsolute volume falls down slowly. $his
indicates that on the 4nnouncement )ate, there must have been some adverse impact on the
investors so that the volume had been shot up. In all, we can see that there e#ist abnormality in
the volume due to poor return generated by the script.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
1. TINPLATE Ltd.
A0nor"$* Return @PriceA: @In Percent$-eA
Ti&e 'in(o) C*&" A+" Vo,*&e
AD-30 TO AD-01 18.84%
AD-10 TO AD-1 19.00%
AD 2.26%
AD1-ED-1 -21.68%
ED 4.96%
ED1-ED10 19.92%
ED1-ED30 33.26%
M!"# D"$%& A'. (!)*+# 2.29%
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see that before the 4nnouncement )ate of )ividend, there was a big positive 'umulative
4bnormal 0eturn. $he return has somewhat worsened on the 4nnouncement )ate and thereafter.
>ut again on the e#-dividend date, the returns have increased. :ven after the e#-dividend date,
the returns have increased. *o this is a good script to invest for the investors.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA:
N
o
AD-30
TO
AD-
AD-0
TO
AD- AD
AD!
TO
ED- ED
ED!
TO
ED!0
ED!
TO
ED!30
CUM. AB
492712
.23
557122
.64
108204
.95
-
41583
.49
-
10283
.05
510117
.59
114927
9.82
# DAYS 30.00 10.00 1.00 40.00 1.00 10.00 30.00
3
AVE.DAILY
AB (1/2)
16423.
74
55712.
26
108204
.95
-
1039.
59
-
10283
.05
51011.
76
38309.3
3
$ AVE.VOL.
19268.0
5
%
AB/AVE
(3/4) 0.85 2.89 5.62 -0.05 -0.53 2.65 1.99
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see that there is a big amount of abnormality in the volume on the 4nnouncement )ate.
$his could be due to huge selling pressure on the 4nnouncement )ate. $he 4bsolute volume
rises gradually before the 4nnouncement )ate and reaches on a high peak on the 4nnouncement
)ate. 4fter the 4nnouncement of )ividend, the 4bsolute volume falls down slowly. $his
indicates that on the 4nnouncement )ate, there must have been some adverse impact on the
investors so that the volume had been shot up. >ut after the e#-dividend date, the situation has
improved and the script has started generating positive absolute volume.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
OIL AND /AS SECTOR
. ON/C
A0nor"$* Return @PriceA: @In Percent$-eA
Ti&e 'in(o) C*&" A+" Vo,*&e
AD-30 TO AD-01 1.60%
AD-10 TO AD-1 -0.96%
AD -1.82%
AD1-ED-1 12.87%
ED -0.22%
ED1-ED10 -4.46%
ED1-ED30 3.92%
M!"# D"$%& A'. (!)*+# 0.13%
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see that before the 4nnouncement date of dividend, there was a big negative 'umulative
4bnormal 0eturn. $he return is further worsened on the 4nnouncement )ate. >ut after the
4nnouncement date, the returns have shot up sharply. $his indicates that there has been some
positive impact on the investors on the announcement date. >ut the returns have turned negative
on the e#-dividend date and thereafter.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA:
N
o
AD-30
TO
AD-
AD-0
TO
AD- AD
AD!
TO ED-
ED
ED!
TO
ED!0
ED!
TO
ED!30
CUM. AB
-
64088
1.16
-
24413
4.08
62220
.86
-
191350
8.43
-
26527
8.14
-
101740
6.81
-
323646
0.43
# DAYS 30.00 10.00 1.00 75.00 1.00 10.00 30.00
3
AVE.DAILY
AB (1/2)
-
21362.
71
-
24413.
41
62220
.86
-
25513.4
5
-
26527
8.14
-
101740.
68
-
107882.
01
$ AVE.VOL.
423018.
14
%
AB/AVE
(3/4) -0.05 -0.06 0.15 -0.06 -0.63 -0.24 -0.26
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see that there is a big amount of abnormality in the volume on the 4nnouncement )ate.
$his could be due to huge selling pressure on the 4nnouncement )ate. $he 4bsolute volume
rises gradually before the 4nnouncement )ate and reaches on a high peak on the 4nnouncement
)ate. 4fter the 4nnouncement of )ividend, the 4bsolute volume falls down slowly. $his
indicates that on the 4nnouncement )ate, there must have been some adverse impact on the
investors so that the volume had been shot up. In all, we can see that there e#ist abnormality in
the volume due to poor return generated by the script.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
). /AIL Ltd.
A0nor"$* Return @PriceA: @In Percent$-eA
Ti&e 'in(o) C*&" A+" Vo,*&e
AD-30 TO AD-01 -10.08%
AD-10 TO AD-1 -8.89%
AD 1.45%
AD1-ED-1 13.81%
ED -0.26%
ED1-ED10 0.87%
ED1-ED30 0.41%
M!"# D"$%& A'. (!)*+# 0.04%
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see that before the 4nnouncement date of dividend, there was a big negative 'umulative
4bnormal 0eturn. $he return is somewhat better on the 4nnouncement )ate. >ut immediately
after the announcement date the returns had shot up sharply. $his indicates that on the
announcement date, there must have been some positive impact on the investors because of
which the returns have increased. 4fter the e#-dividend date, there has been fluctuation in the
returns.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA:
N
o
AD-30
TO AD-

AD-0
TO
AD- AD
AD!
TO ED-
ED
ED!
TO
ED!0
ED!
TO
ED!30
CUM. AB
171019
9.38
24648
1.19
37804
6.65
496553
5.14
-
24489
5.35
-
56468
0.46
86179
7.27
# DAYS 30.00 10.00 1.00 64.00 1.00 10.00 30.00
3
AVE.DAILY
AB (1/2)
57006.6
5
24648.
12
37804
6.65
77586.4
9
-
24489
5.35
-
56468.
05
28726.
58
$ AVE.VOL.
34446
4.35
%
AB/AVE
(3/4) 0.17 0.07 1.10 0.23 -0.71 -0.16 0.08
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see that there is a big amount of abnormality in the volume on the 4nnouncement )ate.
$his could be due to huge selling pressure on the 4nnouncement )ate. $he 4bsolute volume
rises gradually before the 4nnouncement )ate and reaches on a high peak on the 4nnouncement
)ate. 4fter the 4nnouncement of )ividend, the 4bsolute volume falls down slowly. $his
indicates that on the 4nnouncement )ate, there must have been some adverse impact on the
investors so that the volume had been shot up. In all, we can see that there e#ist abnormality in
the volume due to poor return generated by the script. $he situation has improved after the e#-
dividend date i.e. from the day after the e#-dividend date till the month after the e#-dividend date
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
,. A0$n O## S&ore
A0nor"$* Return @PriceA: @In Percent$-eA
Ti&e 'in(o) C*&" A+" Vo,*&e
AD-30 TO AD-01 -16.82%
AD-10 TO AD-1 -0.42%
AD -2.85%
AD1-ED-1 8.01%
ED -2.52%
ED1-ED10 -13.20%
ED1-ED30 -26.19%
M!"# D"$%& A'. (!)*+# -0.36%
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see that before the 4nnouncement date of dividend, there was a big negative 'umulative
4bnormal 0eturn. $he return is further worsened on the 4nnouncement )ate. >ut after the
4nnouncement date, the returns have shot up sharply. $his indicates that there has been some
positive impact on the investors on the announcement date. >ut the returns have turned negative
on the e#-dividend date and thereafter.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA:
N
o
AD-30
TO
AD-
AD-0
TO AD-
AD
AD!
TO
ED- ED
ED!
TO
ED!0
ED!
TO
ED!30
CUM. AB
96668
7.24
173284
5.12
28358
6.39
-
35126
0.85
-
63146
1.61
-
434323
1.88
-
1298120
1.59
# DAYS 30.00 10.00 1.00 34.00 1.00 10.00 30.00
3
AVE.DAILY
AB (1/2)
32222.
91
173284
.51
28358
6.39
-
10331.
20
-
63146
1.61
-
434323
.19
-
432706.
72
$ AVE.VOL.
1297227
.61
%
AB/AVE
(3/4) 0.02 0.13 0.22 -0.01 -0.49 -0.33 -0.33
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see that before the 4nnouncement date of dividend, there was a big negative 'umulative
4bnormal 0eturn. $he return is further worsened on the 4nnouncement )ate. >ut after the
4nnouncement date, the returns have shot up sharply. $his indicates that there has been some
positive impact on the investors on the announcement date. >ut the returns have turned negative
on the e#-dividend date and thereafter.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
PO?ER SECTOR
.. NTPC Ltd
A0nor"$* Return @PriceA: @In Percent$-eA
Ti&e 'in(o) C*&" A+" Vo,*&e
AD-30 TO AD-01 5.15%
AD-10 TO AD-1 6.18%
AD 1.54%
AD1-ED-1 -4.05%
ED -0.62%
ED1-ED10 -1.27%
ED1-ED30 -0.16%
M!"# D"$%& A'. (!)*+# 0.01%
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see that before the 4nnouncement )ate of )ividend, there was a big positive 'umulative
4bnormal 0eturn. $he return has somewhat worsened on the 4nnouncement )ate. $he returns
after the 4nnouncement date have been negative throughout which indicates that there has been
some adverse impact on the investors on the 4nnouncement date.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA:
N
o
AD-30
TO AD-

AD-0
TO AD-
AD
AD!
TO ED-
ED
ED!
TO
ED!0
ED!
TO
ED!30
CUM. AB
-
856619
4.56
-
137544
8.11
117172
6.11
-
940010
8.89
-
34189
8.89
-
795286
0.22
-
1980566
3.89
# DAYS 30.00 10.00 1.00 98.00 1.00 10.00 30.00
3
AVE.DAILY
AB (1/2)
-
285539
.82
-
137544
.81
117172
6.11
-
95919.
48
-
34189
8.89
-
795286
.02
-
660188.
80
$ AVE.VOL.
1599144
.89
%
AB/AVE
(3/4) -0.18 -0.09 0.73 -0.06 -0.21 -0.50 -0.41
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see that there is a big amount of abnormality in the volume on the 4nnouncement )ate.
$his could be due to huge selling pressure on the 4nnouncement )ate. $he 4bsolute volume
rises gradually before the 4nnouncement )ate and reaches on a high peak on the 4nnouncement
)ate. 4fter the 4nnouncement of )ividend, the 4bsolute volume falls down slowly. $his
indicates that on the 4nnouncement )ate, there must have been some adverse impact on the
investors so that the volume had been shot up. In all, we can see that there e#ist abnormality in
the volume due to poor return generated by the script.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
2. Po8er /rid Ltd.
A0nor"$* Return @PriceA: @In Percent$-eA
Ti&e 'in(o) C*&" A+" Vo,*&e
AD-30 TO AD-01 15.32%
AD-10 TO AD-1 0.59%
AD -0.05%
AD1-ED-1 0.44%
ED 0.17%
ED1-ED10 -0.20%
ED1-ED30 1.02%
M!"# D"$%& A'. (!)*+# 0.13%
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see that before the announcement date of dividend there was a big positive 'umulative
4bnormal 0eturn. >ut it falls substantially on the announcement date. $his negative return is due
to heavy selling on the announcement day. $he situation has improved thereafter till the e#-
dividend date. 4fter the e#-dividend date, the returns have reduced.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA
N
o
AD-30
TO AD-

AD-0
TO AD-
AD
AD!
TO ED-
ED
ED!
TO
ED!0
ED!
TO
ED!30
CUM" A-
977547
6.21
149353
6.34
-
41186
5.24
-
556476
9.13
-
103617
8.24
-
347847
3.42
-
145192
36.97
# DAYS 30.00 10.00 1.00 63.00 1.00 10.00 30.00
3
AVE"DAIL
Y A-
./#0
325849
.21
149353
.63
-
41186
5.24
-
88329.
67
-
103617
8.24
-
347847
.34
-
483974.
57
$ AVE"VOL"
135697
9.24
%
A-/AVE
.3/$0 0.24 0.11 -0.30 -0.07 -0.76 -0.26 -0.36
Inter(ret$tion
$he period of a month before the 4nnouncement date had a positive absolute volume. >ut then
after, the absolute volume turned negative. $hus, it is not advisable to invest in such a script.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
3. T$t$ Ltd.
A0nor"$* Return @PriceA: @In Percent$-eA
Ti&e 'in(o) C*&" A+" Vo,*&e
AD-30 TO AD-01 -0.84%
AD-10 TO AD-1 -1.29%
AD 0.10%
AD1-ED-1 11.84%
ED -2.66%
ED1-ED10 0.10%
ED1-ED30 12.34%
M!"# D"$%& A'. (!)*+# 0.18%
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see that before the 4nnouncement date of dividend, there was a big negative 'umulative
4bnormal 0eturn. $he return is somewhat better on the 4nnouncement )ate. >ut immediately
after the announcement date the returns had shot up sharply. $his indicates that on the
announcement date, there must have been some positive impact on the investors because of
which the returns have increased. $he returns were negative on the e#-dividend date but
thereafter the returns have increased substantially.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA:
N
o
AD-30
TO
AD-
AD-0
TO
AD- AD
AD!
TO ED-
ED
ED!
TO
ED!0
ED!
TO
ED!30
CUM" A-
-
463004
.42
-
589144
.33
-
75328
.42
-
200395
3.33
-
88426
.42
-
335100
.33
-
117331
4.58
# DAYS 30.00 10.00 1.00 44.00 1.00 10.00 30.00
3
AVE"DAILY
A- ./#0
-
15433.
48
-
58914.
43
-
75328
.42
-
45544.3
9
-
88426
.42
-
33510.
03
-
39110.4
9
$ AVE"VOL"
144315.
42
%
A-/AVE
.3/$0 -0.11 -0.41 -0.52 -0.32 -0.61 -0.23 -0.27
Inter(ret$tion
We can see that there is a big amount of abnormality in the volume on the 4nnouncement )ate.
$his could be due to huge selling pressure on the 4nnouncement )ate. $he 4bsolute volume
rises gradually before the 4nnouncement )ate and reaches on a high peak on the 4nnouncement
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
)ate. Gowever, after the 4nnouncement of )ividend, the 4bsolute volume increases till the e#-
dividend date. >ut after the e#-dividend date, it again starts falling.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
REALITY SECTOR
4. DL! Ltd.
A0nor"$* Return @PriceA: @In Percent$-eA
Ti&e 'in(o) C*&" A+" Vo,*&e
AD-30 TO AD-01 3.74%
AD-10 TO AD-1 7.95%
AD 1.11%
AD1-ED-1 16.18%
ED -0.45%
ED1-ED10 0.41%
ED1-ED30 19.44%
M!"# D"$%& A'. (!)*+# 0.28%
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
$his is a good script to invest in. $he returns have remained positive before and after the
4nnouncement date. Anly on the e#-dividend date, the script showed negative returns, but after
that the returns have been positive. $his indicates there has been some positive impact on the
investors on the e#-dividend date.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA:
N
o
AD-30
TO AD-

AD-0
TO AD-
AD
AD!
TO ED-
ED
ED!
TO
ED!0
ED!
TO
ED!30
CUM. AB
175654
6.23
-
173386
1.03
-
42373
4.72
336378
07.87
189129
9.28
609118
6.69
205226
44.36
# DAYS 30.00 10.00 1.00 103.00 1.00 10.00 30.00
3
AVE.DAILY
AB (1/2)
58551.
54
-
173386
.10
-
42373
4.72
326580.
66
189129
9.28
609118
.67
684088.
15
$ AVE.VOL.
125896
1.72
%
AB/AVE
(3/4) 0.05 -0.14 -0.34 0.26 1.50 0.48 0.54
Inter(ret$tion
$he abnormality in the volume on the 4nnouncement )ate reached at its peak in terms of
negativity. $he situation improved thereafter leading to an increase in the absolute volume. $he
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
absolute volume reached at its peak on the e#-dividend date. $his can be due to huge selling
pressure on the :#-dividend date. $hereafter the absolute volume has decreased subse,uently.
5. An$ntr$< Ltd.
A0nor"$* Return @PriceA: @In Percent$-eA
Ti&e 'in(o) C*&" A+" Vo,*&e
AD-30 TO AD-01 -74.99%
AD-10 TO AD-1 -13.06%
AD 0.14%
AD1-ED-1 -38.77%
ED -9.32%
ED1-ED10 -0.99%
ED1-ED30 -30.06%
M!"# D"$%& A'. (!)*+# -1.45%
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see that before the 4nnouncement date of dividend, there was a big negative 'umulative
4bnormal 0eturn. $he return is somewhat better on the 4nnouncement )ate. >ut immediately
after the announcement date the returns had fallen sharply. $his indicates that on the
announcement date, there must have been some adverse impact on the investors because of
which the returns have fallen down. $he returns have remained negative after the 4nnouncement
)ate.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA:
N
o
AD-30
TO AD-

AD-0
TO AD-
AD
AD!
TO ED-
ED
ED!
TO
ED!
0
ED!
TO
ED!30
CUM" A-
-
432134
7.70
-
129286
4.43
-
27297
2.92
-
147507
3.89
-
21677
3.92
-
67089
.51
-
283157
5.30
# DAYS 30.00 10.00 1.00 34.00 1.00 10.00 30.00
3
AVE"DAILY
A- ./#0
-
144044.
92
-
129286.
44
-
27297
2.92
-
43384.5
3
-
21677
3.92
-
6708.
95
-
94385.8
4
$ AVE"VOL"
443745.
92
%
A-/AVE
.3/$0 -0.32 -0.29 -0.62 -0.10 -0.49 -0.02 -0.21
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see that there is a big amount of abnormality in the volume on the 4nnouncement )ate.
$his could be due to huge selling pressure on the 4nnouncement )ate. $he 4bsolute volume
rises gradually before the 4nnouncement )ate and reaches on a high peak on the 4nnouncement
)ate. 4fter the 4nnouncement of )ividend, the 4bsolute volume falls down slowly. $his
indicates that on the 4nnouncement )ate, there must have been some adverse impact on the
investors so that the volume had been shot up. In all, we can see that there e#ist abnormality in
the volume due to poor return generated by the script.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
)6. Ac'ruti Cit% Ltd.
A0nor"$* Return @PriceA: @In Percent$-eA
Ti&e 'in(o) C*&" A+" Vo,*&e
AD-30 TO AD-01 27.50%
AD-10 TO AD-1 13.95%
AD -0.82%
AD1-ED-1 31.11%
ED 2.65%
ED1-ED10 2.41%
ED1-ED30 27.23%
M!"# D"$%& A'. (!)*+# 0.72%
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
We can see that before the 4nnouncement )ate of )ividend, there was a big positive 'umulative
4bnormal 0eturn. $he return has somewhat worsened on the 4nnouncement )ate. >ut after the
4nnouncement date, the returns have shot up sharply. $his indicates that there has been some
positive impact on the investors on the announcement date. *o this is a good script to invest in
for the investors.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
A0nor"$* Return @Vo*u"eA:
N
o
AD-30
TO
AD-
AD-0
TO
AD- AD
AD!
TO ED-
ED
ED!
TO
ED!
0
ED!
TO
ED!30
CUM. AB
208679
.63
461323
.53
50292
.79
229793
1.47
49021
.79
20871
.53
219441
8.37
# DAYS 30.00 10.00 1.00 30.00 1.00 10.00 30.00
3
AVE.DAILY
AB (1/2)
6955.9
9
46132.
35
50292
.79
76597.7
2
49021
.79
2087.
15
73147.2
8
$ AVE.VOL.
39140.2
1
%
AB/AVE
(3/4) 0.18 1.18 1.28 1.96 1.25 0.05 1.87
Inter(ret$tion
$his script is a good one to invest as it has positive absolute volume prior to the 4nnouncement
date and also after the 4nnouncement date. $he script also has positive absolute volume prior
and after the e#-dividend date.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
C&$(ter 9 2 !indin-s
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Me$n Cu"u*$tive A0nor"$* Return
TIME 'INDO' Mean C*&*,ati1e A+nor&a, Ret*rn
AD-30 TO AD-01 -1.36%
AD-10 TO AD-01 -2.91%
AD 0.43%
AD01 TO ED-01 -6.23%
ED -2.58%
ED01 TO ED10 -10.75%
ED01 TO ED30 -9.75%
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
ean cumulative 4bnormal 0eturn shows the average abnormal return for a given window
among the firms. We can see that it is low before the announcement date. 4s dividend is
announced cumulative abnormal return rises, this shows that abnormality is created due to
declaration of dividend. *o we can consider that on the basis of analysis of above 28 companies
that on average on announcement date ma#imum price rise is seen because declaration of
dividend brings about positive impression in the mind of investors towards the company. ore
over many intraday traders also participate for short term gain during the entire day. $his yields
positive cumulative abnormal return for the average companies. In addition if we think rationally
this is the normal and general tendency among the investors. $here is a big negative cumulative
abnormal return between the announcement date and effective date. $he reason is that there is
general tendency among investors to wait till the effective date to reali=e the dividend income.
)ue to this number of transaction taking place reduces. $his brings about negative cumulative
abnormal effect during this period. $his is the normal market scenario. 4nd we can see that
market runs accordingly. :ven after the effective date the return goes on reducing. It means big
supply pressure is created by dividend effect which brought the price down and so the abnormal
value also comes down. $he reason is that after reali=ing the dividend income the share holders
want to sell of the shares but at that time other investors are not ready to purchase shares. *o
$his also shows the general tendency of investors of buying shares after the dividend is
announced and selling out on the e#-dividend date.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Me$n Aver$-e A0nor"$* Return
TIME 'INDO' Mean a1era2e A+nor&a, Ret*rn
AD-30 TO AD-01 -0.20%
AD-10 TO AD-01 0.07%
AD 0.43%
AD01 TO ED-01 -0.10%
ED -2.58%
ED01 TO ED10 0.16%
ED01 TO ED30 0.12%
Inter(ret$tion
ean 4verage 4bnormal 0eturn indicates the daily average return in a given window among the
firms. We can see in the above chart that the average abnormal return is highest positive on
announcement date. Oradually from the period 4) to it again goes on decreasing. $his is
because of higher participation among investors in market. >ut in long run that is after effective
date it again start rising. $his is again because of huge buying pressure that is generated by
dividend effect. $hus it is better for any new investor to invest in company as soon as divided is
announced and should sell of the shares immediately after the dividend is paid out.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Me$n o# Aver$-e D$i*% Cu"u*$tive A0nor"$* Vo*u"e
TIME 'INDO' MADCAV
AD-30 TO AD-01 556231.972
AD-10 TO AD-01 -160613.327
AD 217554.3427
AD01 TO ED-01 1087939.343
ED -167032.854
ED01 TO ED10 -846716.415
ED01 TO ED30 -2465219.33
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
4)'4R indicates the average daily cumulative abnormal volume among the firms. 4s we can
see form the above chart that ma#imum trading takes place between announcement date to
effective date time period. >efore the announcement date however, mainly before three months
to one month ma#imum trading take place. $his indicates that there is good supply of shares and
at the same time new and small participation might also take place. 4fter effective date the
abnormal return drastically reduces due to non participation of large investors. When we see such
huge abnormal effect in comparison of price effect we can clearly say that there is huge
abnormal trading taking place after the dividend. >ut the supply pressure is so high that it leads
to decrease in price of shares resulting into negative cumulative abnormal return.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Me$n R$tio o# A7. Vo*u"e To Av- Vo*u"e
TIME 'INDO' MRA-AV
AD-30 TO AD-01 0.01
AD-10 TO AD-01 0.04
AD 0.70
AD01 TO ED-01 0.00
ED -0.24
ED01 TO ED10 0.01
ED01 TO ED30 0.21

[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Inter(ret$tion
$his ratio indicates how much times the abnormal volume traded greater than the average
volume traded. )uring the period from 4)-28 to 4) the script generated positive cumulative
abnormal volume. We can see that the ratio is very less before one month of announcement date.
$his is because there is huge li,uidity problem before announcement date in shares. An
announcement date ratio have reached to 8.H8 which means that lot many investors have
participate to gain long term as well as short term gains. Intra traders participate on this day to
gain short term profits arising from price fluctuations. $his leads to very high positive
cumulative abnormal return. >etween announcement date and e#-dividend date the ratio is very
low. $his is because after dividend is announced people prefer dividend to be paid and price to
be come down in more tradable range. *o in order to earn the dividend income the investors
retain their shares upto effective date. $hus no transactions takes place as there are buyers but no
sellers. $his brings about negative impact on volume of transactions thereby leading to negative
cumulative abnormal return. 4fter effective date the ratio is seem to be rising which means that
investors have reali=ed the dividend income and now they want to sell of their shares. >uying
pressure was already there during the period between 4) to . >ut now after the effective date
selling pressure have also generated. $his neutrali=es the effect and thereby generate positive
cumulative abnormal volume as more number of takes place. $hus the market behaves in a
rational manner.

[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
'hapter - H 0ecommendations
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Reco""end$tions
• $he dividend news in the market creates abnormality in the return and volume of the script,
so that investor should not treat that markets are always efficient.
• Investors should behave rationally while taking their decision regarding investment in any
script. $hey should wait for the abnormality in the script to be removed before investing in
it.
• !or long term investor, dividend decision of a company should not be a ma"or influencing
factor in their investment decision.
• Investors should consider the fundamentals of the company before investing in it and should
consider the actual performance of the company over the period of time.
• )ividend as a corporate event affects the share prices of the firm for a specific time period
only. 4s dividend event gets over the abnormality in the script is removed and the stock
prices start reflecting its actual value. *o investors should not get lured by the dividends.
• )irectors should adopt a dividend policy which gives consideration to the interests of each
of the group comprising a substantial proportion of shareholders.
• 4 definite dividend policy, followed for a long period in the past trends to create clientele
effect. $hat is it attracts those investors that consider the dividend policy in accord with their
investment re,uirements. If the company suddenly changes its dividend policy, it may work
to the detriment to those shareholders as they may have to switch to other companies to
fulfil their needs. $hus an established dividend policy should be changed only after having
an analy=ed its probable effect on e#isting shareholders. It should be changed slowly and not
abruptly.
• 4 huge positive abnormal return before the announce date of dividend indicates the sins of
leakage of any insider information. *o the investor must check room for such insider
information before investing in that company. $his will help them to protect themselves
from future losses.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
'hapter - K 'onclusions
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Conc*usions
• $his pro"ect e#amines the relation between dividend decision and its impact on the
market price of the stock.
• $he information about the corporate dividend policies brings abnormality in the market
and market does perform efficiently.
• $he movements in stock prices and trading volume are influenced by the flow of new
information into the market.
• $he dividend effect are reflected into the market price of the company within the time
period of few days before the announce date to few days after the e#-dividend date.
• Insider information plays vital role in the fluctuations of stock price and trading volume
of and company which has declared dividend.
• We can conclude from this pro"ect that there is linear relationship between dividend
decision and market price of the company for a limited duration. $hereafter the markets
start behaving efficiently and absorb all the available information in the market.
[AN EMPIRICAL STUDY OF CORPORATE
DIVIDEND POLICY]
Re#rences
3. 4nand, . (688E). !actors influencing dividend policy decisions of corporate india.
I'!4I Lournal of 4pplied !inance, 38(6), 1 -3F
6. >eechey, , Oruen, ) T Rickery, L.(6888). $he efficient market Gypothesis: 4 survey.
0eserve >ank of 4ustralia, :conomic 0esearch )epartment.
2. )r. M.*.0 (6882, "une 33). )ividend &olicy of Indian corporate firm: 4n analysis of trends
and determinants. 0etrieved !eburary 6K, 688I, from www.ssrn.com:
http:QQpapers.ssrn.comQsol2Qresults.cfm5 0e,uest $imeout U 18888888
E. !arou,ui, *.7., T saiyed, 4.4. (688K, 4pril). )ividend - 4 lure for investors. >anking
!inance,1
1. >lack, !. (3IHF), ividend &u==le< Lournal for portfolio anagement, Rol. 6, .o 6,
winter,pp. 1-K
F. ahah"an, * T *ingh, >, (688K). ;$rading Rolume and 0eturn Rolatility )ynamics in
Indian *tock arket.< $he I'!4I "ournal of 4pplied !inance.,3E(6),68.
H. 0i"wani, p. (688H). *tock split - $he mystery 7nleashed, 0esearch )evelopment
4ssociation Lournal, )ecember 688H.
K. *ingla, G.V. (688H, ay). ;4n :mpirical $est - *tock *plit 4nnouncement in Indian
arket.< &ortfolio Arganiser, I
I. iller, and V. 0ock (3IK1), ; )ividend &olicy under 4symmetric Information