Dividend Announcement and Market Response in Indian Stock Market: An Event-Study Analysis:
TL;DR: In this article, the authors show that there will be significant differences in share prices of sampled companies mediated (moderated) by dividend announcement, and significant differences between positive and negative average abnormal returns along with the ranks of firms.
Abstract: Event study has remained one of the highly pursued areas of research in corporate finance. Studies reported in this realm empirically show that the economic model or the capital asset pricing model (CAPM) yields relatively better results with respect to the abnormal return of stocks preceded by dividend announcement by the dividend payers as compared to the statistical model, namely, constant return or market model approaches. Both models are incorporated in the study to triangulate the outcomes more accurately. A few hypotheses posited in this paper are namely, there will be significant differences in share prices of sampled companies mediated (moderated) by dividend announcement, and there will be significant differences between positive and negative average abnormal returns along with the ranks of firms.
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TL;DR: This paper examined the impact of the Russia-Ukraine war on the constituent firms of the leading stock market indices of the G7 countries to provide insights into the vulnerability of firms to war events.
Abstract: PurposeThis study examines the impact of the Russia–Ukraine war on the constituent firms of the leading stock market indices of the G7 countries to provide insights into the vulnerability of firms to war events.Design/methodology/approachThis study employs the event study method on a sample of 531 firms covering the period from 02 March 2021 to 08 March 2022 and conducts a cross-sectional analysis of cumulative abnormal returns and country- and firm-specific variables.FindingsRisk exposure and trade dependence trigger invasion-generated negative abnormal returns. The authors demonstrate that stock prices are fragile to geopolitical risks and trade dependence. Consistent with previous literature, the authors find evidence of a size anomaly and high risk associated with a higher book-to-market ratio.Research limitations/implicationsThis study has implications for policymakers identifying the firm-specific variables driving event-induced returns. While providing insights into the geographical diversification of funds, this study shows the heterogeneous characteristics of firms operating in these countries.Originality/valuePrevious studies on the Russia–Ukraine war have been limited to analyzing the behavior of leading stock market indices without examining firm-level variations triggered by the war. This study fills this gap and contributes to the growing literature on the Russia–Ukraine crisis in two ways: first, it provides firm-level evidence from the G7 countries in addition to how global stock market indices have reacted to the invasion and second, it uses cross-sectional analysis to provide evidence of the characteristics that make firms resilient to wars.HighlightsWe are the first to report firm-level evidence of the Russia–Ukraine war effectsFirms in France and the United States are unaffectedStock prices are fragile to geopolitical risks and considerable dependence on tradeHigher book-to-market exposes the firms to the risk of exogenous shocksSmaller firms outperform large firms in the G7 stock markets
45 citations
TL;DR: In this article, the authors investigated stock price reactions to stock dividend announcements, 30 days before and after the announcement dates, of publicly traded companies in the period 2006-2012, using an event study methodology for 460 events and daily stock price data for companies in CRSP historical data set.
29 citations
TL;DR: A paucity of systematic study regarding the motives, nature and impact of buyback on share prices of companies in India is found in this article, where the authors present a systematic study on the impact of share repurchase on Indian companies' share prices.
Abstract: Share repurchase is becoming an important corporate practice in India of late. But, there exists a paucity of systematic study regarding the motives, nature and impact of buyback on share prices of...
15 citations
Cites background from "Dividend Announcement and Market Re..."
...Though there are some studies on the effect of dividend announcements on stock prices in the Indian equity market (e.g., Saravanakumar, 2011; Maitra and Dey, 2012), surprisingly, there are very few in-depth studies for share buybacks by the Indian companies....
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TL;DR: In this paper, the difference in the firm and market specific factor for underpricing of IPOs is investigated. And the principal objective of the article is to investigate the difference between the two factors.
Abstract: Underpricing of IPOs has been contemplated as a prevalent phenomenon across the world. The principal objective of the article is to investigate the difference in the firm and market specific factor...
14 citations
Cites background from "Dividend Announcement and Market Re..."
...(Allen and Faulhaber, 1989), (Ibbotson, 1975), (Baker and Wurgler, 2007), (Maitra & Dey, 2012), (Dash & Padhi, 2011) and (Bansal & Khanna , 2012c) explained the informed investors withdraw in issues, which are overpriced leaving the uninformed investors with the winner’s curse problem....
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TL;DR: In this article, the authors empirically examined the price behaviour around cash dividend announcements of the firms listed on the National Stock Exchange of India Ltd (NSE) in order to understand whether dividen...
Abstract: This article empirically examines the price behaviour around cash dividend announcements of the firms listed on the National Stock Exchange of India Ltd (NSE) in order to understand whether dividen...
11 citations
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Book•
01 Jan 1997TL;DR: In this paper, Campbell, Lo, and MacKinlay present an attempt by three well-known and well-respected scholars to fill an acknowledged void in the empirical finance literature, a text covering the burgeoning field of empirical finance.
Abstract: This book is an ambitious effort by three well-known and
well-respected scholars to fill an acknowledged void in the
literature—a text covering the burgeoning field of empirical finance.
As the authors note in the preface, there are several excellent books
covering financial theory at a level suitable for a Ph.D. class or as
a reference for academics and practitioners, but there is little or
nothing similar that covers econometric methods and applications.
Perhaps the closest existing text is the recent addition to the Wiley
Series in Financial and Quantitative Analysis. written by Cuthbertson
(1996). The major difference between the books is that Cuthbertson
focuses exclusively on asset pricing in the stock, bond, and foreign
exchange markets, whereas Campbell, Lo, and MacKinlay (henceforth CLM)
consider empirical applications throughout the field of finance,
including corporate finance, derivatives markets, and market
microstructure. The level of anticipation preceding publication
can be partly measured by the fact that at least three reviews
(including this one) have appeared since the book arrived. Moreover,
in their reviews, both Harvey (1998) and Tiso (1998) comment on the
need for such a text, a sentiment that has been echoed by numerous
finance academics.
7,169 citations
TL;DR: In this paper, the authors examine properties of daily stock returns and how the particular characteristics of these data affect event study methodologies and show that recognition of autocorrelation in daily excess returns and changes in their variance conditional on an event can sometimes be advantageous.
6,651 citations
TL;DR: In this paper, the effect of differences in dividend policy on the current price of shares in an ideal economy characterized by perfect capital markets, rational behavior, and perfect certainty is examined.
Abstract: In the hope that it may help to overcome these obstacles to effective empirical testing, this paper will attempt to fill the existing gap in the theoretical literature on valuation. We shall begin, in Section I , by examining the effects the effects of differences in dividend policy on the current price of shares in an ideal economy characterized by perfect capital markets, rational behavior, and perfect certainty. Still within this convenient analytical framework we shall go on in Section II and III to consider certain closely related issues that appear to have been responsible for considerable misunderstanding of the role of dividend policy. In particular, Section II will focus on the longstanding debate about what investors "really" capitalize when they buy shares; and Section III on the much mooted relations between price, the rate of growth of profits, and the rate of dividends per share. Once these fundamentals have been established, we shall proceed in Section IV to drop the assumption of certainty and to see the extent to which the earlier conclusions about dividend policy must be modified. Finally, in Section V , we shall briefly examine the implications for the dividend policy problem of certain kinds of market imperfections.
6,265 citations
"Dividend Announcement and Market Re..." refers background in this paper
...But a different view was again hypothesized, popularly known as the Modigliani and Miller (M–M) hypothesis (1961). It reiterates that under a perfect market situation, the dividend policy of a firm is irrelevant as it remains insensitive towards the value of the firm. They commented that the value of the firm depends on the firm’s earnings that result in its investment policy. Thus, when an investment decision is given the dividend decision, the proportion of dividends and retained earnings, produces hardly any significant impact on the value of the firm. During the same period it was arguably contested by Solomon (1963). He concluded that dividend announcements always come out with new information....
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...But a different view was again hypothesized, popularly known as the Modigliani and Miller (M–M) hypothesis (1961). It reiterates that under a perfect market situation, the dividend policy of a firm is irrelevant as it remains insensitive towards the value of the firm....
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TL;DR: In this article, it is argued that income numbers cannot be defined substantively, that they lack "meaning" and are therefore of doubtful utility, and the argument stems in part from the patchwork development of account-based theories.
Abstract: Accounting theorists have generally evaluated the usefulness of accounting practices by the extent of their agreement with a particular analytic model. The model may consist of only a few assertions or it may be a rigorously developed argument. In each case, the method of evaluation has been to compare existing practices with the more preferable practices implied by the model or with some standard which the model implies all practices should possess. The shortcoming of this method is that it ignores a significant source of knowledge of the world, namely, the extent to which the predictions of the model conform to observed behavior. It is not enough to defend an analytical inquiry on the basis that its assumptions are empirically supportable, for how is one to know that a theory embraces all of the relevant supportable assumptions? And how does one explain the predictive powers of propositions which are based on unverifiable assumptions such as the maximization of utility functions? Further, how is one to resolve differences between propositions which arise from considering different aspects of the world? The limitations of a completely analytical approach to usefulness are illustrated by the argument that income numbers cannot be defined substantively, that they lack "meaning" and are therefore of doubtful utility.' The argument stems in part from the patchwork development of account-
6,043 citations
"Dividend Announcement and Market Re..." refers background in this paper
...Ball and Brown (1968) found that after announcement of earnings, cumulative abnormal returns continue to move up for good news and move down in the wake of bad news....
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...Ball and Brown (1968) applied the concept of information contained on earnings and Fama et al. (1969) examined the effects of stock splits after removing the effects of simultaneous dividend increases....
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TL;DR: In this paper, the authors examine the process by which common stock prices adjust to the information (if any) that is implicit in a stock split and show that the independence of successive price changes is consistent with a market that adjusts rapidly to new information.
Abstract: There is an impressive body of empirical evidence which indicates that successive price changes in individual common stocks are very nearly independent. Recent papers by Mandelbrot and Samuelson show rigorously that independence of successive price changes is consistent with an "efficient" market, i.e., a market that adjusts rapidly to new information. It is important to note, however, that in the empirical work to date the usual procedure has been to infer market efficiency from the observed independence of successive price changes. There has been very little actual testing of the speed of adjustment of prices to specijc kinds of new information. The prime concern of this paper is to examine the process by which common stock prices adjust to the information (if any) that is implicit in a stock split
4,470 citations