A Further Examination of the Price and Volatility Impact of Stock Dividends at Ex-Dates

21 Pages Posted: 6 Sep 2005

See all articles by Balasingham Balachandran

Balasingham Balachandran

La Trobe University - School of Economics and Finance; Financial Research Network (FIRN)

Robert W. Faff

University of Queensland

Sally Tanner

Monash University - Department of Accounting

Abstract

We examine the price and volatility reaction around stock dividend ex-dates for an Australian sample, over the period January 1992 to December 2000. We find that price reaction around stock dividend ex-dates provides positive abnormal returns both prior, and subsequent, to the abolishment of par value of shares in July 1998. When we partitioned the sample into financial, industrial non-financial and mining firms, the price reaction is found to be positive and significant only for industrial non-financial companies. Volatility of daily returns for periods subsequent to ex-dates is significantly greater than corresponding periods prior to announcement dates, while cumulative raw returns subsequent to ex-dates are significantly lower than periods prior to announcement dates for industrial non-financial companies. The magnitude of the price reaction is statistically significantly related to an increase in the volatility of daily returns and to a reduction in cumulative raw returns subsequent to the ex-dates, for industrial non-financial companies. These findings support buying pressure hypothesis suggested by Dhatt et al. (1994, 1996).

Suggested Citation

Balachandran, Balasingham and Faff, Robert W. and Tanner, Sally, A Further Examination of the Price and Volatility Impact of Stock Dividends at Ex-Dates. Australian Economic Papers, Vol. 44, No. 3, pp. 248-268, September 2005. Available at SSRN: https://ssrn.com/abstract=786087

Balasingham Balachandran (Contact Author)

La Trobe University - School of Economics and Finance ( email )

La Trobe University
Bundoora, Vic, 3086
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Robert W. Faff

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

Sally Tanner

Monash University - Department of Accounting ( email )

Building 11E
Clayton, Victoria 3800
Australia

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