The stock market reaction to stock dividends in Pakistan and their information content

Abstract

This research study aimed to investigate the reaction of stock prices to dividend announcement and their information content in listed companies of Pakistan. The study was carried in the context of pharmaceutical companies listed at Pakistan Stock Exchange. It was intended to analyze all the 12 pharmaceutical companies listed at Pakistan Stock Exchange; however, a sample of 9 companies was selected, since three of the companies were omitted due to insufficient data availability. A total of 6473 observations were collected for the period of three years from January 1st, 2015 to December 31st, 2017. Almost there are 48 events occur during this period. The study computed actual returns, market returns, abnormal returns and cumulative abnormal returns. Event study mythology and t-test were used to generate the results. The analysis included an event window of 20 days, -10 days and +10 days from the announcement date. Results of the study showed mixed outcomes some evidences of semi-strongly market efficiency or other cases in which market did not react abnormally to the dividend announcement.