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Dividend Surprise and Market Reaction: Evidence from Dhaka Stock Exchange (DSE) Ltd.

South Asian Journal of Management, Vol 13, No. 4, October-December 2006

16 Pages Posted: 19 Dec 2006 Last revised: 9 Apr 2011

Mohammad Farhad Hossain

TWO MEN AND A TRUCK

Mohammad Siddiquee

Masud Ibn Rahman

Daffodil International University - Faculty of Business and Economics

Abstract

This paper examines the stock market reaction to dividend announcement in the emerging stock market of Bangladesh. A sample of 50 listed companies from different sectors of the Dhaka Stock Exchange (DSE) is examined for a period of four years (2001-2004). Our finding shows average abnormal return (AAR) gets a pick one day before the dividend announcement, and after the dividend announcement, it falls sharply. Also revealed from this study is the cumulative abnormal return (CAR) of almost all the companies around the study period, which have increased just before the dividend announcement date, did not sustain in the ex-dividend period. Regression analysis depicts that the overall models considered are statistically significant in most of the cases, which means there is a very strong evidence of sensitivity of dividend declaration on the market. The sensitivity is prominent on the day after or the day before the declaration rather than the declaration day. These findings justify that information leakage is evident before the dividend announcement, and dividend announcement carries some significant information content. Thus, it can be concluded that, during the period under study, dividend had strong impact about signaling the future prospects of the companies under study.

Suggested Citation

Hossain, Mohammad Farhad and Siddiquee, Mohammad and Rahman, Masud Ibn, Dividend Surprise and Market Reaction: Evidence from Dhaka Stock Exchange (DSE) Ltd.. South Asian Journal of Management, Vol 13, No. 4, October-December 2006. Available at SSRN: https://ssrn.com/abstract=952188

Mohammad Farhad Hossain (Contact Author)

TWO MEN AND A TRUCK ( email )

Toronto, Ontario M6A 2Y6
Canada

Masud Ibn Rahman

Daffodil International University - Faculty of Business and Economics ( email )

102 Sukrabad, Mirpur Road, Dhanmondi
Dhaka, 1207
Bangladesh

HOME PAGE: http://www.daffodilvaristy.edu.bd

No contact information is available for Mohammad Siddiquee

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