The Effect of Dividend Announcements on Stock Prices in Capital Market of Bangladesh: The Case of Dhaka Stock Exchange

Abstract

This study analyzes the effect of different types of dividend
announcements on the stock prices in Dhaka Stock Exchange during both
bullish market in 2010 and bearish market in 2011. The different types of
dividends are cash dividend, stock dividend, and combination of cash and stock
dividend. The study empirically examines the abnormal returns in the prices of
stocks listed with Dhaka Stock Exchange occurring as a result of cash dividend
announcements only, stock dividend announcements only and combined cash
and stock dividend announcements during 2010 and 2011 using conventional
event study approach especially market adjusted model. The study concluded
that there are significant negative abnormal returns in stock prices as a result of
cash dividend announcements, but no significant abnormal returns in stock
prices in response to stock dividend announcements, and combined cash and
stock dividend announcements during both bullish market in 2010 and bearish
market in 2011.