Title: Market reaction to the annual cash dividend changes in Pakistan

Authors: Sana Tauseef

Addresses: Department of Finance, Institute of Business Administration (IBA), Karachi, Pakistan

Abstract: This study examines the investors' response to announcement of cash dividend changes made by firms listed on Pakistan Stock Exchange. It also investigates the factors contributing to the investors' behaviour surrounding the annual dividend announcements over the years 2011 to 2017. Results of event study analysis show that investors respond negatively to the announcement of dividend decrease; however, there is no evidence of positive investor response following dividend increase. The regression results show that the stocks abnormal returns earned on and after the announcement of dividends are positively impacted by dividend change and dividend yield. Our findings contribute to literature on market inefficiency through providing a partial support for signalling hypothesis and have significant implications for investors and firm managers.

Keywords: dividend change; abnormal return; panel data; event study; Pakistan.

DOI: 10.1504/AAJFA.2023.132202

Afro-Asian Journal of Finance and Accounting, 2023 Vol.13 No.3, pp.305 - 319

Received: 20 Dec 2019
Accepted: 26 Aug 2020
Published online: 13 Jul 2023 *

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