The Impact of Initiating Dividend Payments on Shareholders’ Wealth: Evidence from Egypt

Abstract

Purpose – The goal of this study is to look into how signaling and dividend policy affect stock market values. Design/methodology/approach – Ten firms that are listed on the Egyptian Exchange (EGX-30) and (EGX-70) are taken as a sample for the period 2017-2021. Provided data on dividend announcement signaling over five years was computed using a 20-day window from the announcement date to the Ex-Coupon date for the specified duration. The study uses Eviews-12’s Generalised Method of Moments (GMM) for dynamic panel models to examine how dividend policy and signaling impact stock market prices are related. Findings – The findings reveal, that Dividend payments have a significant positive signaling effect on stock prices in the Egyptian Stock Market. Research limitations/implications – This study fills the research gap in the Egyptian context specifically, as well as globally by providing important insights into the relationship between a firm’s dividend policy and shareholders’ wealth. However, because this study is based in Egypt, the generalizability of the results would be limited. Practical implications – The study’s conclusions can assist business management in formulating dividend policies that will optimize shareholder wealth. Additionally, this study gives investors direction and information on which businesses to invest in to increase their wealth.