Effect of Dividend on Stock Price in Emerging Stock Market: A Study on the Listed Private Commercial Banks in DSE

Abstract

Stock price reactions to the announcement of dividend of the banking industry of Bangladesh are empirically analyzed. This study examines stock price reactions of listed Private Commercial Banks (PCBs) in Bangladesh surrounding 44 days of the dividend announcement dates. The major objective of this study is to identify whether dividend announcement convey any information to the market that results a price reaction for adjusting the dividend announcement information. The empirical part of this study employs a standard event study methodology to analyze the stock price reaction for dividend announcement. Out of 25 listed sample banks in the observation period, market adjusted stock price declines for 11 banks, rises for 6 banks and no changes for 8 banks and statistical pooled t-test also reveals that stock price reaction to dividend announcement are not statistically significant. Finally, dividend announcement does not convey any information due to strong contribution of the insider trading as well as some other influencing factors in the capital market. [ABSTRACT FROM AUTHOR]