Do Dividend Announcements have any impact on Returns: A comparative study on the Public and Private Scripps of KSE

Abstract

The study was conducted in addition to the abundance of evidence associating announcements of changes in dividends with abnormal share price performance. It attempts to determine the impact of dividend announcement on stock returns of publicly and privately owned firms from KSE (Karachi Stock Exchange) listed companies. The results were drawn on the basis of a regression analysis of the relationship between stock returns and trends. Stocks of different companies were selected from the KSE-100 index to examine and analyze the effect of dividend announcement on the returns. Fourteen companies were selected representing both the privately owned and publicly owned companies. Stock price of each scrip was taken before and after the dividend announcement date. Betas were calculated using the returns before and after the dividend announcement to compare the effects of the announcement. Results of the study are suggesting low returns during dividend announcement days (both before and after). There is also a noticeable change in the direction of trend after the dividend announcement. The recommendation to investors is that they should refrain from focusing on returns during the period of dividend announcement and if they wish to invest, they must weigh the costs and benefits associated with investing during the period.