Dividend announcements impact on stock returns: Evidence from the emerging market of India

Abstract

This article presents the results of an empirical study of the impact of dividends announcements on the Indian companies’ stock returns. Interest in the Indian stock market is due to the fact that today it is one of the largest and fastest growing markets. The research method used to measure the market reaction to announcements of dividend payments, is the event study analysis. The study was conducted on a sample of Indian companies whose shares are actively traded on the Bombay Stock Exchange in the period 2010 to 2012. The results obtained allow concluding that the Indian market, on average, reacts positively on the announcement of the increased dividend amount, reacts negatively to the announcement of the reduced amount of dividends and does not react on the announcement about the dividend amount unchanged.