The Impact of a Surprise Dividend Increase on a Stocks Performance : the Analysis of Companies Listed on the Warsaw Stock Exchange

Słoński, Tomasz; Zawadzki, Bartosz

doi:10.5277/ord120204

Author

Słoński Tomasz (Wrocław University of Economics, Poland), Zawadzki Bartosz (Wrocław University of Economics, Poland)

Title

The Impact of a Surprise Dividend Increase on a Stocks Performance : the Analysis of Companies Listed on the Warsaw Stock Exchange

Source

Operations Research and Decisions, 2012, vol. 22, no. 2, s. 45-54, rys., bibliogr. 13 poz.

Keyword

Studium przypadku, Spółki giełdowe, Dywidenda, Stopa zwrotu, Giełda papierów wartościowych
Case study, Stock market companies, Dividend, Rate of return, Stock market

Note

summ.

Abstract

The reaction of marginal investors to the announcement of a surprise dividend increase has been measured. Although field research is performed on companies listed on the Warsaw Stock Exchange, the paper has important theoretical implications. Valuation theory gives many clues for the interpretation of changes in dividends. At the start of the literature review, the assumption of the irrelevance of dividends (to investment decisions) is described. This assumption is the basis for up-to-date valuation procedures leading to fundamental and fair market valuation of equity (shares). The paper is designed to verify whether the market value of stock is immune to the surprise announcement of a dividend increase. This study of the effect of a surprise dividend increase gives the chance to partially isolate such an event from dividend changes based on long-term expectations. The result of the research explicitly shows that a surprise dividend increase is on average welcomed by investors (an average abnormal return of 2.24% with an associated p-value of 0.001). Abnormal returns are realized by investors when there is a surprise increase in a dividend payout. The subsample of relatively high increases in a dividend payout enables investors to gain a 3.2% return on average. The results show that valuation models should be revised to take into account a possible impact of dividend changes on investors behavior. (original abstract)

Accessibility

The Main Library of the Cracow University of Economics
The Library of Warsaw School of Economics
The Library of University of Economics in Katowice
The Main Library of Poznań University of Economics and Business
The Main Library of the Wroclaw University of Economics

Full text

Bibliography

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Cited by

ISSN

2081-8858

Language

eng

URI / DOI

BazEkon - The Main Library of the Cracow University of Economics

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