Dividend Announcement
Transcript of Dividend Announcement
TABLE OF CONTENTS
CHAPTER 1: INYRODUCTION AND RESEARCH METHODOLOGY…………..3
1.1 INTRODUCTION ………………………………...............................4
1.2 OBJECTIVE OF THE STUDY……………………………………….6
1.3 LITERATURE REVIEW……………………………………………..7
1.4 RESEARCH METHODOLOGY………………….............................11
CHPATER 2: DATA ANALYSIS AND INTERPRETATION………………………13
2.1 SECONDARY ANALYSIS…………………………….....................14
2.2 PRIMARY ANALYSIS………………………………………….......34
CHAPTER 3: FINDINGS AND CONCLUSION ……………………………………62
CHAPTER4: LIMITATION…………………………………………………………..66
CHAPTER5: BIBLOGRAPHY………………………………….................................67
CHAPTER5: ANNEXURE………………………………………………………........68
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LIST OF TABLES AND FIGURES
TABLES PAGE NO.
TABLE1…………………………………………………………………………….............................34
TABLE2……………………………………………………………………………………………...36
TABLE3……………………………………………………………………………………………...37
TABLE4……………………………………………………………………………………………...39
TABLE5…………………………………………………….. ………………………..........................41
TABLE6…………………………………………………….. ………………………………………43
TABLE7……………………………………………………..................................................................45
TABLE8………………………………………………………………………………………………47
TABLE9………………………………………………………………………………………………50
TABLE10……………………………………………………………………………………………..53
TABLE11……………………………………………………………………………………………..56
TABLE12……………………………………………………………………………………………..58
TABLE13……………………………………………………………………………………………..60
FIGURES
FIGURE1……………………………………………………………………………………………..34
FIGURE2……………………………………………………………………………………………..36
FIGURE3……………………………………………………………………………………………..37
FIGURE4……………………………………………………………………………………………..39
FIGURE5……………………………………………………………………………………………..41
FIGURE6……………………………………………………………………………………………..43
FIGURE7……………………………………………………………………………………………..45
FIGURE8.1, 8.2……………………………………………………………………………………….48
FIGURE8.3, 8.4……………………………………………………………………………………….49
FIGURE9.1, 9.2……………………………………………………………………………………….51
FIGURE9.3, 9.4……………………………………………………………………………………….52
FIGURE10.1, 10.2…………………………………………………………………………………….54
FIGURE10.3, 10.4…………………………………………………………………………………….55
FIGURE11…………………………………………………………………………………………….56
FIGURE12…………………………………………………………………………………………….58
FIGURE13…………………………………………………………………………………………….60
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CHAPTER – 1
INTRODUCTION AND RESEAECH
METODOLOGY
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ITRODUCTION
Investment means commitment of funds or money to gain a return. However, this commitment
of capital also has a price in terms of blocking of money and that too with a risk of losing it.
The concept is applied while investing in common stock in a more precise manner. Stock means
purchasing a share in the company’s business which entitles the investors to share profits
generated by the company. Stocks are more volatile and risky than debt securities. Before
investing into common stock, an investor should keep three factors in mind i.e., nature of
business, quality of management and price to be paid. These three factors will help together to
decide the proportion and time of investment. In addition to these factors there are so many
points to be considered before an investor finally takes a decision to invest in a particular
security. These factors can be knowledge of share market, trading at stock exchanges, risk and
return analysis, dividend expectations, news announcements especially dividend
announcements etc.
The most awaited type of regular return for an investor who invests into equity stocks are
dividends. Dividends are payments made by a corporation to its shareholders. It is the portion of
corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that
money can be put to two uses: it can either be re-invested in the business (called retained
earnings), or it can be paid to the shareholders as a dividend. Many corporations retain a portion
of their earnings and pay the remainder as a dividend. The variation in the stock prices would be
more if dividend policy is frequently changed. It happens due to the frequent reactions of
investors in lieu of announcements at stock exchanges by the companies. Corporate
announcements refer to information provided by company officials time to time in the stock
markets. These announcements are generally communicated through annual financial reports of
the companies and the same are floated in stock exchanges for the information of investors.
However, before formal release of annual report if need be companies might provide relevant
and material information through a press release. In addition to information floated by
companies there can be various other general information and news in the market due to which
stock prices may change. The impact of various announcements in addition to dividend
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declaration like mergers and acquisitions, management change over, new product launch,
starting of a new project or shutting down an existing one, political changes, central government
policy changes etc. is directly observed on stock returns of the company. They tend to fluctuate
as soon as the news is floated on the trading floor in stock exchanges.
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OBJECTIVES OF THE STUDY
To study the effect of Dividend Announcement on stock prices.
To study the trend of prices at Pre-announcement and Post-announcement period.
To study the awareness level of the investors regarding Dividend Announcements.
To study the effect of Dividend Announcement on investing decision of Individual investor.
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REVIEW OF LITERATURE
The researchers and academicians in India as well as abroad have made contribution in their
researches on dividend policies and announcement effect of dividends on stock prices. Bae Gil
S. (2008) examined negative tunneling within a chaebol and used a large sample of earnings
announcements made by firms belonging to Korean chaebols. The study found out that the
announcement increased (decreased) earnings over the previous year by a chaebol-affiliated
firm had a positive (negative) effect on the abnormal return for the value -weighted portfolio of
other non-announcing affiliates in the same group. Dasilas Apostolos (2008) investigated the
stock market reaction of the Athens Stock Exchange to cash dividend announcements for the
period 2000-2004. In particular, the study examined both the stock price and trading volume
response to company announcements about dividend distributions. The dividend distribution in
Greece featured remarkable differences from those of US, UK and other developed markets.
Eriotis Nikolaos (2007) discovered that existence of a long term dividend policy stood partly
unaffected by the level of current period earnings. Hazak Aaro (2007) presented a theoretical
model on dividend policy for distributed profit taxation which is the corporate taxation regime
of Estonia. Henry Elaine (2006) examined market reactions to firm’s earnings announcements.
The study extended the examination to include a broad range of concurrent disclosure contained
in earnings press releases, the financial disclosures captured as accounting ratios and verbal
components of disclosure which were captured using elementary computer based content
analysis. Hochberg Yael V. (2003) examined the effects of venture capital backing on the
corporate governance of the firm following the IPO. The study conducted three independent
sets of tests which examined effectively how governance and monitoring differed for venture
and non-venture backed firms. How Janice C. Y. (2007) observed that in a relatively less
litigious environment like Australia it was common to find IPO firms that voluntarily provided
forecasts in their prospectus. 158 Australian industrial IPOs listed from 1991 to 1997 were used
in the study to examine the impact of the disclosure and accuracy of earnings and dividend
forecasts on equity pricing. Hribar Paul (2004) examined how institutional investors respond to
accounting restatements. The study showed that transient institutional investors defined as
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institutions with shorter investment horizons and higher portfolio turnover significantly reduced
their holding in a restating firm at least one quarter prior to the quarter of the restatement.
Jegadeesh Narasimhan (2002) examined the relation between revenue surprises and future stock
returns. The study investigated how analysts updated their earnings forecasts followed by
announcements of revenue and earnings surprises. The results indicated that the stock price
reaction on the earnings announcement date was significantly related to both revenue surprises
and earnings surprises. Kanniainen Juho (2007) examined stochasticity of stock return volatility
by questioning the assumption that the conditional expectations of future dividends react to the
same new information. The stochastic evolutions of conditional dividend expectations were
characterized by extending the information process to dividend paying stocks. Kanwal Anil
(2008) observed profitability as always been considered as a primary indicator of dividend
payout ratio. Apart from profitability, numerous other factors like cash flows, corporate tax,
sales growth and market to book value ratio were also considered rampant. Koerniadi Hardjo
(2008) examined in their study whether managers deliberately used accruals to convey
information regarding firm future profitability. The contemporaneous earnings and dividend
announcement data was used as research setting as it reduced the possibility of opportunistic
income smoothing by managers and hence increased the validity of the inference on the accrual
signaling hypothesis. Kumar Praveen (2006) derived a conditional CAPM in a general
equilibrium model where investors faced estimation risk on mean returns and learnt from
information of uncertain quality or precision. In equilibrium, the loading on market risk
augmented the standard beta with the random or information dependent conditional covariance
matrix of the unknown mean returns. Minnick Kristina L. (2004) examined the cross sectional
determinants of the decision to take write offs. A hand collected dataset on write-offs was used
that was much more comprehensive than existing write-off datasets. It was found that quality of
governance was positively related to write-off decisions in the cross section. The results also
suggested that poor governance companies waited to take write-offs until it became inevitable
while well-monitored companies took write-offs sooner. Narayanamoorthy Ganapathi (2003)
identified previously undocumented source of predictable cross-sectional variation in
Standardized Unexpected Earnings’ autocorrelations viz. the sign of the most recent earnings
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realization and presented evidence that the market ignored this variation (loss effect). It was
possible to earn returns higher than from the Bernard and Thomas strategy by incorporating this
feature. Padgett Carol (2007) tested the signaling and free cash flow hypotheses of the
information content of share repurchases using UK open market share repurchases between
January 1999 and December 2004. The five day mean announcement abnormal return of the
sample was low at 1.28% but it was statistically significant at the 5% level. Rees Lynn (2001)
examined the importance attached to revenue forecasts by firms and the market and whether
these forecasts were value-relevant conditional on earnings forecasts. The study was divided
into parts. First, it examined whether the capital market reaction to earnings and revenue
announcements had an association with revenue forecast errors conditional on earnings forecast
errors. Second, it investigated existence of differential valuation effects associated with meeting
or exceeding analysts’ revenue expectations over and above meeting/exceeding analysts’
earnings expectations. Sadka Ronnie (2005) investigated the components of liquidity risk that
were important for asset pricing anomalies. Firm-level liquidity was decomposed into variable
and fixed price effects and was estimated using intraday data for the period 1983-2001. The
unexpected systematic variations of the variable component rather than the fixed component of
liquidity were shown to be priced within the context of momentum and post earnings
announcement drift portfolio returns. Servaes Henri (2008) studied responses of industry when
another firm in the same industry was put to a hostile takeover attempt. The study documented
two major responses: first the industry peers cut their capital expenses, free cash flows, cash
holdings, increased their leverage and payouts to shareholders. Second, they increased the
quality of financial reporting. After the control threat, there was an evidence of less earnings
management, more timely loss recognition and more value relevance of accounting earnings.
Shu Tao (2008) analyzed the impact of trader composition i.e., the fraction of total trading
volume of a stock accounted for by institutional trading on the cross section of stock returns.
The study found that trader composition had significant effects on stock returns beyond
institutional ownership. Specifically, major stock market anomalies such as return momentum,
post earnings-announcement drift, value premium and investment effect were much stronger in
stocks with lower fraction of institutional trading volume. Subramani Mani R. (2002) examined
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the returns to e-commerce events in the period from 1999 to 2000 which employed a set of
short time windows (1 day, 5 days, 10 days bracketing the event) as well as a set of long event
windows (6 months, 9 months and 1 year from the event). The results reflected little
consistency between abnormal returns in short 1 day, 5 days and 10 days event windows. In
contrast, the abnormal returns observed in 6, 9 and 12 months windows were reasonably
consistent. Zhu PengCheng (2008) examined the short term stock performance of a sample of
Indian firms who acquired U.S. firms in the period 1999-2005. The event study showed that
Indian stock market reacted positively to the acquisition announcement. Authors found out that
the positive abnormal return lasted for only three days after which the returns became negative.
The research work carried so far related to announcement effects has not stressed upon any key
sector of the economy. Moreover, significant results as to the relationship between
announcements and their impact on stock returns have not been discovered. Dividend
announcements in particular have been studied by various eminent scholars yet they have not
brought in a common conclusion in relation to the impact of dividend announcements on stock
returns or stock volatility before and after declaration of dividends. Thus, the present study
contributes towards the impact of dividend announcements on stock returns vis a vis analysis of
stock price variations before and after dividend declaration.
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RESEARCH METHODOLOGY
RESEARCH TYPEWe use descriptive research and exploratory research design in our studies. Descriptive
research is also called Statistical Research. The main goal of this type of research is to describe
the data and characteristics about what is being studied. The idea behind this type of research is
to study frequencies, averages, and other statistical calculations. Although this research is
highly accurate, it does not gather the causes behind a situation. Descriptive research is used to
obtain information concerning the current status of the phenomena to describe "what exists"
with respect to variables or conditions in a situation.
The study has focused on 12 companies randomly selected for analyzing dividend
announcement effects. The companies selected are on the basis of Manufacturing companies, IT
companies, Telecom companies, Infrastructure companies and Banking and Finance
companies .These companies are the most popularly traded at NSE India on the basis of their
order of trading volumes. The information about the dividend announcement reaches the
common investors publically
The methods involved range from the survey which describes the status quo, the correlation
study which investigates the relationship between variables, to developmental studies which
seek to determine changes over time.
• Statement of the problem
• Identification of information needed to solve the problem
• Selection or development of instruments for gathering the information
• Identification of target population and determination of sampling procedure
• Design of procedure for information collection
• Collection of information
• Analysis of information
• Generalizations and/or predictions
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DATA COLLECTION
Primary Data: Structured Questionnaire
Secondary Data: Online Database, Journals, Surveys
SAMPLING
We have used convenience sampling technique. It is also called haphazard or accidental
sampling. Members of the population are chosen based on their relative ease of access. To
sample friends, co-workers, or shoppers at a single mall, are all examples of convenience
sampling. Sometimes called grab or opportunity sampling, this is the method of choosing items
arbitrarily and in an unstructured manner from the frame. Though almost impossible to treat
rigorously, it is the method most commonly employed in many practical situations.
Sample Unit: INVESTORS FROM CHANDIGARH, MOHALI AND PATIALA
Sample Technique: Convenient sampling
Sample Area: CHANDIGARH, MOHALI AND PATIALA
Sample Size: 100
TOOLS
Statistical : Tables, Bar Charts and Pie Charts
Techniques : Simple Percentage and ratio
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CHAPTER – 2
DATA INTERPRETATION AND ANALYSIS
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SECONDARY DATA ANALYSIS
INFOSYS TECHNOLOGY LTD.
Dividend: Final Dividend of 770%Thursday, May 25, 2006 Closing Price of the share before announcement and after dividend announcement of final dividend was May 24, 2006 – Rs.2860May 25, 2006 – Rs.2828May 26, 2006 – Rs.2934May 27, 2006 – Rs.2967Dividend: Interim Dividend of 100%Thursday, October 19, 2006 Closing price of the share before and after interim dividend announcement wasOctober 18, 2006 – Rs.2073October 19, 2006 – Rs.2068October 20, 2006 – Rs.2076October 21, 2006 – Rs.2083Dividend: Final Dividend of 130%Wednesday, June 06, 2007 Closing price of the share before and after final dividend announcement wasJune 5, 2007 – Rs.1943June 6, 2007 – Rs.1938June 7, 2007 – Rs.1957June 8, 2007 – Rs.1958
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Dividend: Interim Dividend of 120%Thursday, October 18, 2007 Closing price of the share before and after interim dividend announcement wasOctober 17, 2007 – Rs.1890October 18, 2007 – Rs.1890October 19, 2007 – Rs.1909October 22, 2007 – Rs.1956
Dividend: Final Dividend of 545%Thursday, May 29, 2008 Closing price of the share before and after final dividend announcement wasMay 28, 2008 – Rs.1911May 29, 2008 – Rs.1885May 30, 2008 – Rs.1962June 2, 2008 – Rs.1964Dividend: Interim Dividend of 200%Thursday, October 16, 2008 Closing price of the share before and after interim dividend announcement wasOctober 15, 2008 – Rs.1335October 16, 2008 – Rs.1263October 17, 2008 – Rs.1284October 20, 2008 – Rs.1294Dividend: Final Dividend of 270%Thursday, June 04, 2009 Closing price of the share before and after final dividend announcement wasJune 3, 2009 – Rs.1641June 4, 2009 – Rs.1629June 5, 2009 – Rs.1698June 6, 2009 – Rs.1742Dividend: Interim Dividend of 200%Thursday, October 15, 2009 Closing price of the share before and after interim dividend announcement wasOctober 14, 2009 – Rs.2243October 15, 2009 – Rs.2217October 16, 2009 – Rs.2289October 17, 2009 – Rs.2293Dividend: Final Dividend of 300%Wednesday, May 26, 2010 Closing price of the share before and after final dividend announcement wasMay 25, 2010 – Rs.2533May 26, 2010 – Rs.2621May 27, 2010 – Rs.2643May 28, 2010 – Rs.2677
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Dividend: Interim Dividend of 800%Thursday, October 21, 2010 Closing price of the share before and after interim dividend announcement wasOctober 20, 2010 – Rs.3018October 21, 2010 – Rs.3034October 22, 2010 – Rs.3053October 25, 2010 – Rs.3089Dividend: Final Dividend of 400%Thursday, May 26, 2011 It is Proposed Dividend not yet paid
Infosys practice frequent Dividend announcement which is why there stock prices have higher value.
From the above data it is clearly specified that Post-announcement effect is more than the Pre-announcement effect as the socks are rising after the dividend is paid and not before it.
The stock prices are showing same trend whether it is interim Dividend announcement or Final Dividend announcement.
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WIPRO LTD.
Dividend: Final Dividend of 250%Thursday, June 29, 2006 Closing price of the share before and after final dividend announcement wasJune 28, 2006 – Rs.484June 29, 2006 – Rs.496June 30, 2006 – Rs.513July 3, 2006 – Rs.530Dividend: Interim Dividend of 250%Monday, March 26, 2007 Closing price of the share before and after interim dividend announcement wasMarch 26, 2007 – Rs.581March 28, 2007 – Rs.594March 29, 2007 – Rs.592March 30, 2007 – Rs.595Dividend: Final Dividend of 50%Thursday, June 28, 2007 Closing price of the share before and after final dividend announcement wasJune 27, 2007 – Rs.509June 28, 2007 – Rs.514June 29, 2007 – Rs.518July 2, 2007 – Rs.523Dividend: Interim Dividend of 100%Thursday, October 25, 2007Closing price of the share before and after interim dividend announcement wasOctober 24, 2007 – Rs.486October 25, 2007 – Rs.496October 26, 2007 – Rs.499
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October 29, 2007 – Rs.509Dividend: Final Dividend of 200%Friday, June 27, 2008 Closing price of the share before and after final dividend announcement wasJune 26, 2008 – Rs.440June 27, 2008 – Rs.439June 30, 2008 – Rs.450June 1, 2008 – Rs.482Dividend: Final Dividend of 200%Monday, June 29, 2009 Closing price of the share before and after final dividend announcement wasJune 29, 2009 – Rs.377June 30, 2009 – Rs.379July 1, 2009 – Rs.379July 2, 2009 – Rs.381Dividend: Final Dividend of 300%Tuesday, June 15, 2010 Closing price of the share before and after final dividend announcement wasJune 14, 2010 – Rs.404June 15, 2010 – Rs.647June 16, 2010 – Rs.408June 17, 2010 – Rs.413Dividend: Interim Dividend of 100%Thursday, January 27, 2011 Closing price of the share before and after interim dividend announcement wasJanuary 25, 2011 –Rs.438January 27, 2011 – Rs.446January 28, 2011 – Rs.447January 31, 2011 – Rs.456
Wipro practice same frequent dividend announcement like Infosys and both are IT companies.
From the above data it is clearly specified that Post-announcement effect is more than the Pre-announcement effect as the socks are rising after the dividend is paid and not before it.
The stock prices are showing same trend whether it is interim Dividend announcement or Final Dividend announcement.
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TATA MOTORS
Dividend: Final Dividend of 130%Friday, June 23, 2006 Closing price of the share before and after final dividend announcement wasJune 22, 2006 – Rs.758June 23, 2006 – Rs.775June 25, 2006 – Rs.777June 26, 2006 – Rs.780Dividend: Final Dividend of 150%Friday, June 01, 2007 Closing price of the share before and after final dividend announcement wasMay 31, 2007 – Rs.710June 1, 2007 – Rs.710June 4, 2007 – Rs.747June 5, 2007 – Rs.755Dividend: Final Dividend of 150%Monday, June 16, 2008 Closing price of the share before and after final dividend announcement wasJune 16, 2008 – Rs.516June 17, 2008 – Rs.519June 18, 2008 – Rs.521June 19, 2008 – Rs.534
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Dividend: Final Dividend of 60%Monday, August 03, 2009 Closing price of the share before and after final dividend announcement wasAugust 3, 2009 – Rs.431August 4, 2009 – Rs.443August 5, 2009 – Rs.449August 6, 2009 – Rs.456Dividend: Final Dividend of 150%Tuesday, August 10, 2010 Closing price of the share before and after final dividend announcement wasAugust 9, 2010 – Rs.919August 10, 2010 – Rs.957August 11, 2010 – Rs.1006August 12, 2010 – Rs.1024
Tata Motors comes under manufacturing companies’ category and this company has a policy of announcement of dividend on yearly basis i.e. only final dividend is announced.
From the above data it is clearly specified that Post-announcement effect is more than the Pre-announcement effect as the socks are rising after the dividend is paid and not before it.
As the company only announces final dividend the effect of Dividend announcement reflect to only that particular period which is mostly June and August.
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MARUTI SUZUKI INDIA LTD.
Dividend: Final Dividend of 70%Wednesday, August 23, 2006 Closing price of the share before and after final dividend announcement wasAugust 22, 2006 – Rs.836August 23, 2006 – Rs.826August 24, 2006 – Rs.830August 25, 2006 – Rs.833Dividend: Final Dividend of 90%Wednesday, August 22, 2007 Closing price of the share before and after final dividend announcement wasAugust 21, 2007 – Rs.767August 22, 2007 – Rs.765August 23, 2007 – Rs.775August 24, 2007 – Rs.890Dividend: Final Dividend of 100%Thursday, August 14, 2008 Closing price of the share before and after final dividend announcement wasAugust 13, 2008 – Rs.669August 14, 2008 – Rs.650August 18, 2008 – Rs.670August 19, 2008 – Rs.675Dividend: Final Dividend of 70%Tuesday, August 18, 2009 Closing price of the share before and after final dividend announcement wasAugust 17, 2009 – Rs.1275August 18, 2009 – Rs.1300August 19, 2009 – Rs.1301
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August 20, 2009 – Rs.1370Dividend: Final Dividend of 120%Tuesday, August 24, 2010 Closing price of the share before and after final dividend announcement wasAugust 23, 2010 – Rs.1220August 24, 2010 – Rs.1227August 25, 2010 – Rs.1233August 26, 2010 – Rs.1245
Maruti Suzuki comes under manufacturing companies’ category and this company has a policy of announcement of dividend on yearly basis i.e. only final dividend is announced.
From the above data it is clearly specified that Post-announcement effect is more than the Pre-announcement effect as the socks are rising after the dividend is paid and not before it.
As the company only announces final dividend the effect of Dividend announcement reflect to only that particular period which is mostly August and the share prices of the company has shown tremendous growth in past 5 years.
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BHARTI AIRTEL LTD.
Dividend: Final Dividend of 20%Friday, July 24, 2009 Closing price of the share before and after final dividend announcement wasJuly 23, 2009 – Rs.361July 24, 2009 – Rs.364July 25, 2009 – Rs.372July 26, 2009 – Rs.390Split: Stock Split to reduce face value from Rs 10 /share to Rs 5/shareFriday, July 24, 2009 Dividend: Final Dividend of 20%Wednesday, August 18, 2010 Closing price of the share before and after final dividend announcement wasAugust 17, 2010 – Rs.310August 18, 2010 – Rs.314August 19, 2010 – Rs.315August 20, 2100 – Rs.316
Bharti Airtel is a telecom company which rarely announces Dividends as the company in past 5 years announces only 2 Final Dividend.
On July 2009 Company had split their share which results in drastic fall in prices of shares, to counter this company made dividend announcement and the stock prices gain some momentum. Same in the case of 2 announcements.
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So, it is clearly specified that Post-announcement effect is more than the Pre-announcement effect as the socks are rising after the dividend is paid and not before it.
RELIANCE COMMUNICATIONS Ltd.
Dividend: Final Dividend of 10%Thursday, July 05, 2007 Closing price of the share before and after final dividend announcement wasJuly 4, 2007 – Rs.542July 5, 2007 – Rs.543July 6. 2007 – Rs.550July 7, 2007 – Rs.552Dividend: Final Dividend of 15%Friday, September 19, 2008 Closing price of the share before and after final dividend announcement wasSeptember 18, 2008 – Rs.356September 19, 2008 – Rs.369September 20, 2008 – Rs.374September 23, 2008 – Rs.379Dividend: Interim Dividend of 16%Tuesday, August 04, 2009 Closing price of the share before and after interim dividend announcement wasAugust 3, 2009 – Rs.270August 4, 2009 – Rs.279August 5, 2009 – Rs.283August 6, 2009 – Rs.290Dividend: Final Dividend of 17%Monday, September 13, 2010 Closing price of the share before and after final dividend announcement was
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September 13, 2010 – Rs.162September 14, 2010 – Rs.163September 15, 2010 – Rs.165
Reliance Communication comes under Telecom companies’ category and this company has a policy of announcement of dividend on yearly basis i.e. only final dividend is announced.
From the above data it is clearly specified that Post-announcement effect is more than the Pre-announcement effect as the socks are rising after the dividend is paid and not before it.
As the company only announces final dividend the effect of Dividend announcement reflect to only that particular period.
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RELIANCE INFRASTRUCTURE LTD.
Dividend: Final Dividend of 38%Thursday, May 25, 2006 Closing price of the share before and after final dividend announcement wasMay 23, 2009 – Rs.786May 24, 2009 – Rs.798May 25, 2009 – Rs.793May 26, 2009 – Rs.810Dividend: Final Dividend of 53%Thursday, June 28, 2007 Closing price of the share before and after final dividend announcement wasJune 27, 2008 – Rs.669June 28, 2008 – Rs.650June 29, 2008 – Rs.670June 30, 2008 – Rs.675
Dividend: Final Dividend of 63%Friday, July 04, 2008 Closing price of the share before and after final dividend announcement wasJuly 4, 2007 – Rs.542July 5, 2007 – Rs.543July 6. 2007 – Rs.550July 7, 2007 – Rs.552
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Dividend: Final Dividend of 70%Thursday, July 02, 2009 Closing price of the share before and after final dividend announcement wasJuly 1, 2009 – Rs.787July 2, 2009 – Rs.799July 3, 2009 – Rs.795July 4, 2009 – Rs.823
Reliance Infrastructure comes under Infrastructure companies’ category and this company has a policy of announcement of dividend on yearly basis i.e. only final dividend is announced.
From the above data it is clearly specified that Post-announcement effect is more than the Pre-announcement effect as the socks are rising after the dividend is paid and not before it.
As the company only announces final dividend the effect of Dividend announcement reflect to only that particular period that is in the mid of the calendar year.
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INFRASTRUCTURE DEVELOPMENT FINANCE COMPANY LTD.
Dividend: Final Dividend of 12%Thursday, July 10, 2008 Closing price of the share before and after final dividend announcement wasJuly 9, 2010 – Rs.134July 10, 2010 – Rs.136July 11, 2010 – Rs.139July 12, 2010 – Rs.147Dividend: Final Dividend of 12%Tuesday, July 07, 2009 Closing price of the share before and after final dividend announcement wasJuly 16, 2010 – Rs.162July 17, 2010 – Rs.163July 18, 2010 – Rs.165July 19, 2010 – Rs.170Dividend: Final Dividend of 15%Thursday, June 17, 2010 Closing price of the share before and after final dividend announcement wasJune 6, 2009 – Rs.270June 7, 2009 – Rs.279June 8, 2009 – Rs.283June 9, 2009 – Rs.290
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IDFC comes under Infrastructure companies’ category and this company has a policy of announcement of dividend on yearly basis i.e. only final dividend is announced.
From the above data it is clearly specified that Post-announcement effect is more than the Pre-announcement effect as the socks are rising after the dividend is paid and not before it.
As the company only announces final dividend the effect of Dividend announcement reflect to only that particular period that is June or July.
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ICICI BANK LTD.
Dividend: Final Dividend of 85%Thursday, July 06, 2006 Closing price of the share before and after final dividend announcement wasJuly 5, 2009 – Rs.786July 6, 2009 – Rs.798July 7, 2009 – Rs.793July 8, 2009 – Rs.810Dividend: Final Dividend of 100%Thursday, June 14, 2007 Closing price of the share before and after final dividend announcement wasJune 13, 2009 – Rs.787June 14, 2009 – Rs.799June 15, 2009 – Rs.795June 16, 2009 – Rs.823Dividend: Final Dividend of 110%Thursday, July 10, 2008 Closing price of the share before and after final dividend announcement wasJuly 9, 2008 – Rs.356July 10, 2008 – Rs.369July 11, 2008 – Rs.374July 12, 2008 – Rs.379
Dividend: Final Dividend of 110%Thursday, June 11, 2009 Closing price of the share before and after final dividend announcement was
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June 10, 2006 – Rs.836June 11, 2006 – Rs.826June 12, 2006 – Rs.830June 15, 2006 – Rs.833Dividend: Final Dividend of 120%Thursday, June 10, 2010 Closing price of the share before and after final dividend announcement wasJune 9, 2010 – Rs.919June 10, 2010 – Rs.957June 11, 2010 – Rs.1011June 12, 2010 – Rs.1035
ICICI Bank comes under Banking and Finance companies’ category and this company has a policy of announcement of dividend on yearly basis i.e. only final dividend is announced.
From the above data it is clearly specified that Post-announcement effect is more than the Pre-announcement effect as the socks are rising after the dividend is paid and not before it.
As the company only announces final dividend the effect of Dividend announcement reflect to only that particular period that is in the starting of June or July.
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HDFC BANK LTD.
Dividend: Final Dividend of 55%Thursday, May 11, 2006 Closing price of the share before and after final dividend announcement wasMay 10, 2006 – Rs.836May 11, 2006 – Rs.854May 12, 2006 – Rs.886May 13, 2006 – Rs.898Dividend: Final Dividend of 70%Thursday, May 17, 2007 May 16, 2010 – Rs.1220May 17, 2010 – Rs.1227May 18, 2010 – Rs.1233May 19, 2010 – Rs.1245Closing price of the share before and after final dividend announcement wasDividend: Final Dividend of 85%Tuesday, April 29, 2008 Closing price of the share before and after final dividend announcement wasApril 10, 2006 – Rs.898April 11, 2006 – Rs.904April 12, 2006 – Rs.926April 13, 2006 – Rs.947Dividend: Final Dividend of 100%Monday, June 22, 2009 Closing price of the share before and after final dividend announcement was
32
June 15, 2008 – Rs.1335June 16, 2008 – Rs.1345June 17, 2008 – Rs.1489June 20, 2008 – Rs.1442
Dividend: Final Dividend of 120%Thursday, June 10, 2010 Closing price of the share before and after final dividend announcement wasJune 9, 2008 – Rs.1921June 10, 2008 – Rs.1884June 11, 2008 – Rs.1959June 12, 2008 – Rs.1987
HDFC Bank comes under Banking and Finance companies’ category and this company has a policy of announcement of dividend on yearly basis i.e. only final dividend is announced.
From the above data it is clearly specified that Post-announcement effect is more than the Pre-announcement effect as the socks are rising after the dividend is paid and not before it.
As the company only announces final dividend the effect of Dividend announcement reflect to only that particular period.
33
PRIMARY DATA INTERPRETATION AND ANALYSIS
Q1: Are you aware about the dividend announcements made by the companies?
YES (100) NO (0)
Table-1
Figure-1
The awareness level among the respondents is 100% as all of the investors say ‘yes’ in which
30% are the Business man
40% are the Service man
20% are the Professionals
10% are the students who invest in stocks
Total numbers of investors are 100 and out of which 30 are Business men, 40 are Service
men, 20 are Professionals, 10 are students who invest in stocks.
Analysis of the coming questions will be done according to this proportion of investors.
34
Q: 2 Which type of companies you most prefer for investing?
Large companies
Medium companies
Small companies
Table -2
Investors Large Companies Medium companies Small companies
Business man(30) 16(53.33%) 11(36.67%) 3(10%)
Service man(40) 24(60%) 11(27.5%) 5(12.5%)
Professionals(20) 17(85%) 3(15%) 0(0%)
Student
investors(10)
2(20%) 2(20%) 6(60%)
Figure-2
35
From Table-2 Figure-2 following interpretation has been done:
Out of 30 Business men 53.33% prefer large companies, 36.67% prefer medium scale
companies and only 10% prefer small scale companies.
Out of 40 service men 60% prefer large companies, 27.5% prefer medium companies and
12.5% prefer small companies.
Out of 20 professionals 85% prefer large companies, 15% prefer medium companies and 0%
prefers small companies.
Out of 10 Student investors 20% prefer large companies, 20% prefer medium companies and
60% prefer small companies.
Consolidated interpretation of data:
1. 59 out of 100 investors like to invest in large companies.
2. 27 out of 100 investors like to invest in medium companies.
3. 14 out of 100 investors like to invest in small companies.
36
Q: 3 What are the most preferred sources from which you obtain information about dividend
announcement?
Newspaper
Television
Internet
All of these
Table-3
Investors Newspaper Television Internet All of these
Business
man(30)
2(6.67%) 6(20%) 8(26.67%) 14(46.66%)
Service man(40) 3(7.5%) 5(12.5%) 14(35%) 18(45%)
Professionals(20) 0 4(20%) 12(60%) 4(20%)
37
Student
investors(10)
0 2(20%) 8(80%) 0
Figure-3
From Table-3Figure-3 following interpretation has been done:
Out of 30 Business man 6.67% prefer Newspaper, 20% prefer Television, 26.67% prefer
internet and 46.66% prefer all of these for obtaining information about Dividend
announcements.
Out of 40 Service man only 7.5% prefer Newspaper, 12.5% prefer Television, 35% prefer
internet and 45% prefer All of these for obtaining information about Dividend
announcements.
Out of 20 Professionals 0% prefer Newspaper, 20% prefer Television, 60% prefer Internet
and remaining 20% prefer All of these for obtaining information about Dividend
announcements.
Out of 10 Student investors 0% prefers Newspaper, 20% prefer Television, 80% prefer
Internet and 0% for All of these for obtaining information about Dividend announcements.
Consolidated interpretation of data:
1. 5 out of 100 prefer only Newspaper.38
2. 17 out of 100 prefer only Television.
3. 42 out of 100 prefer only Internet.
4. 36 out of 100 prefer all of these.
Q:4 According to you which type of companies are most frequent in announcement of
dividend?
Manufacturing Companies
IT Companies
Telecom Companies
Trading Companies
Infrastructure Companies
Banking and Finance Companies
Table-4
Investors Manufacture Companies
IT Companie
s
TelecomCompanies
Trading Companies
InfrastructureCompanies
BankingAnd Finance
Business man(30)
2 22 0 0 0 6
Service man(40) 1 35 0 0 0 4
39
Professionals(20) 0 19 0 0 0 1
Student investors(10)
1 7 0 0 0 2
Figure- 4
From Table-4 Figure-4 following interpretation has been done:
According to Business man 6.67% selected manufacturing companies, 73.33% selected IT
companies, 0% selected Telecom companies, 0% selected Trading companies, 0% selected
Infrastructure companies and 20% selected Banking and Finance companies for frequent
announcement of dividends.
According to Service man 2.5% selected manufacturing companies, 87.5% selected IT
companies, 0% selected Telecom companies, 0% selected Trading companies, 0% selected
Infrastructure companies and 10% selected Banking and Finance companies for frequent
announcement of dividends.
According to Professionals 0% selected manufacturing companies, 95% selected IT
companies, 0% selected Telecom companies, 0% selected Trading companies, 0% selected
Infrastructure companies and 5% selected Banking and Finance companies for frequent
announcement of dividends.
According to Student investors 10% selected manufacturing companies, 70% selected IT
companies, 0% selected Telecom companies, 0% selected Trading companies, 0% selected 40
Infrastructure companies and 20% selected Banking and Finance companies for frequent
announcement of dividends.
Consolidated interpretation of data:
1. 4 out of 100 think manufacturing companies are most frequent in announcing of
dividends.
2. 83 out of 100 think IT companies are most frequent in announcing of dividends.
3. 13 out of 100 think Banking and Finance companies are most frequent in announcing
of dividends.
Q: 5 Which type of announcement you think is most effective in pushing the prices of shares?
Dividend announcement
Buyback
Joint venture
Change in capital structure
Government acquisition
Change in management
All of these
Table-5
Investors Dividend Announcement
Buyback JointVenture Change in capital
Govt. acquisition
Change in management
All of these
Business man (30)
26 3 1 0 0 0 0
Service man(40) 32 4 3 0 1 0 0
Professionals(20
)
18 2 0 0 0 0 0
41
Student
investors(10)
8 1 1 0 0 0 0
Figure-5
From Table-5 Figure-5 following interpretation has been done:
86.67% of Business men think Dividend announcement, 10% think Buy Back and 3.33%
think Joint Venture is most effective in pushing the prices of shares.
80% of Service man think Dividend announcement, 10% think Buy Back,7.5% think Joint
Venture and 2.5% think Govt. acquisition is most effective in pushing the prices of shares.
90% of Professionals think Dividend announcement and10% thinks Buy Back is most
effective in pushing the prices of shares.
80% of Student investors think Dividend announcement, 10% think Buy Back and 10%
think Joint Venture is most effective in pushing the prices of shares.
Consolidated interpretation of data:
1. 84 out of 100 think dividend announcement is most effective in pushing the prices of
shares.
2. 10 out of 100 think Buy back announcement is most effective in pushing the prices of
shares.
42
3. 5 out of 100 think Joint Venture announcement is most effective in pushing the prices
of shares.
4. 1 out of 100 think Govt. acquisitions is most effective in pushing the prices of shares.
Q:6 Which type of announcement you think is most effective in falling the prices of shares?
Dividend announcement
Buyback
Joint venture
Change in capital structure
Government acquisition
Change in management
All of these
Table-6
Investors Dividend Announcement
Buyback JointVenture Change in capital
Govt. acquisition
Change in management
All of these
Business man (30)
0 0 0 23 1 6 0
Service man(40) 0 0 0 24 5 11 0
43
Professionals(20
)
0 0 0 17 0 3 0
Student
investors(10)
0 0 0 6 0 4 0
Figure-6
From Table-6 Figure-6 following interpretation has been done:
76.67% of Business men think Change in capital structure, 3.33% think Govt. acquisition
and 20% think Change in management results in falling of the prices of shares.
60% of Service men think Change in capital structure, 12.5% think Govt. acquisition and
27.5% think Change in management results in falling of the prices of shares.
85% of Professionals think Change in capital structure and 15% think Change in
management results in falling of the prices of shares.
60% of Student investors think Change in capital structure and 40% think Change in
management results in falling of the prices of shares.
Consolidated interpretation of data:
44
1. 70 out of 100 think change in capital structure is most effective in falling of stock
prices.
2. 6 out of 100 think Govt. acquisition is most effective in falling of stock prices.
3. 24 out of 100 think change in management is most effective in falling of stock
prices.
Q: 7 Which of the following influence the stock prices more?
Pre-announcement
Post-announcement
Table-7
Investors Pre-announcement Post-announcement
Business man (30) 7 23
Service man(40) 4 36
Professionals(20) 1 19
Student investors(10) 3 7
45
Figure- 7
From Table-7 Figure-7 following interpretation has been done:
Out of 30 Business men 7 said pre-announcement and 23 said post-announcement and in
terms of percentage 23.33% goes for pre-announcement and 76.67% goes for post-
announcement for influencing the stock prices more.
Out of 40 Service men 4 said pre-announcement and 36 said post-announcement and in
terms of percentage 10% goes for pre-announcement and 90% goes for post-announcement
for influencing the stock prices more.
Out of 20 Professionals 1 said pre-announcement and 19 said post-announcement and in
terms of percentage 5% goes for pre-announcement and 95 % goes for post-announcement
for influencing the stock prices more.
46
Out of 10 Student investors 3 said pre-announcement and 7 said post-announcement and in
terms of percentage 30% goes for pre-announcement and 70% goes for post-announcement
for influencing the stock prices more.
Consolidated interpretation of data:
1. 15 out of 100 think pre-announcement has more influence.2. 85 out of 100 think post announcement has more influence.
Q: 8 Do you go by the announcements before investing in shares of any company?
Strongly Agree
Agree
Neutral
Disagree
Strongly disagree
Table-8
Investors Strongly agree
Agree Neutral Disagree Strongly Disagree
Business man (30) 100%
21(70%) 7(23.33%) 2(6.67%) 0 0
Service man (40) 100%
29(72.5%) 10(25%) 1(2.5%) 0 0
47
Professionals (20) 100%
15(75%) 5(25%) 0 0 0
Student investors (10) 100%
5(50%) 5(50%) 0 0 0
Figure 8.1
Figure 8.1 shows the result of Business man in which 70% of them are strongly agree,
23.33% of them are agree and 7.67% of them have neutral opinion regarding the question
48
Figure-8.2
Figure 8.2 shows the result of Service man in which 72.5% of them are strongly agree, 25%
of them are agree and 2.5 % of them have neutral option regarding the question.
Figure-8.3
Figure 8.3 shows the result of Professionals in which 75% of them are strongly agree and
25% of them are agree regarding the question.
Figure-8.4
49
Figure 8.4 shows the result of Student investors in which 50% of them are strongly agree
and50% of them are regarding the question.
Consolidated interpretation shows 70% are strongly agree, 27% are agree and 3% says
neutral in their opinion.
Q:9 Do the Stocks react to dividend announcements?
Strongly Agree
Agree
Neutral
Disagree
Strongly disagree
Table-9
Investors Strongly agree
Agree Neutral Disagree Strongly Disagree
Business man (30) 100%
18(60%) 7(23%) 3(10%) 2(7%) 0
Service man (40) 100%
22(54%) 13(33%) 4(10%) 1(3%) 0
Professionals 12(60%) 5(25%) 0 3(15%) 0
50
(20) 100%
Student investors (10) 100%
4(40%) 3(30%) 2(20%) 1(10%) 0
Figure-9.1
51
Figure-9.1 shows the results of Business man in which 60% of them are strongly agree, 23%
are Agree, 10% of them have Neutral opinion and 7% of them are Disagree regarding the
Question.
Figure-9.2
Figure-9.2 shows the results of Service man in which 54% of them are strongly agree, 33%
are Agree, 10% of them have Neutral opinion and 3% of them are Disagree regarding the
Question.
Figure-9.3
Figure 9.3 shows the results of Professionals in which 60% of them are strongly agree, 25%
are Agree and 15% of them are Disagree regarding the Question.
52
Figure-9.4
Figure 9.4 shows the results of Student investors in which 40% of them are strongly agree,
30% are Agree, 20% have Neutral opinion and 10% of them are Disagree regarding the
Question.
Q: 10 Do You think that Dividend Announcements affect your investing decision?
Strongly Agree
Agree
Neutral
Disagree
Strongly disagree
Table-10
Investors Strongly agree
Agree Neutral Disagree Strongly Disagree
Business man (30) 100%
16 (53%) 12(40%) 2(7%) 0 0
Service man (40) 100%
32(79%) 7(18%) 1(3%) 0 0
Professionals (20) 100%
17(85%) 2(10%) 0 1(5%) 0
Student investors (10)
7(70%) 1(10%) 2(20%) 0 0
53
100%
Figure-10.1
Figure-10.1shows the results of Business man in which 53% are strongly agree, 40% are
Agree, 7% of them have Neutral opinion regarding the question.
Figure-10.2
54
Figure-10.2 shows the results of Service man in which 79% are strongly agree, 18% are
Agree and3% of them have Neutral opinion regarding the question.
Figure-10.3
Figure-10.3 shows the results of Professionals in which 85% are strongly agree, 10% are
Agree and3% of them are Disagree regarding the question.
Figure-10.4
55
Figure-10.4 shows the results of Student investor in which 70% are strongly agree, 10% are
Agree and 20% of them have Neutral opinion regarding the question.
Consolidated interpretation: 72% are strongly agreed, 22% are agreed, 5% says Neutral and
1% are disagree.
Q: 11 What is your action after announcement is made?
You Purchase more Shares of that company
You sell the share
Do nothing and wait
Table-11
Investors Purchase more shares You sell the shares Do nothing & wait
Business man(30) 26(87%) 0 4(13%)
Service man(40) 33(82.5%) 0 7(17.5%)
Professionals(20) 18(90%) 0 2(10%)
Student investors(10) 9(90%) 0 1(10%)
56
Figure-11
From Table-11 Figure-11 following interpretation has been done:
Out of 30 Business man 87% purchase more shares and 13% do nothing and wait after the
dividend announcement is made.
Out of 40 Service man 82.5% purchase more shares and 17.5% do nothing and wait after the
dividend announcement is made.
Out of 20 Professionals 90% purchase more shares and 10% do nothing and wait after the
dividend announcement is made.
Out of 10 Student investors 90% purchase more shares and 10% do nothing and wait after
the dividend announcement is made.
Consolidated interpretation of Data:
1. 86 out of 100 purchases more shares after the announcement is made.
2. 14 out of 100 do nothing and wait after the announcement is made.
57
Q: 12 what do you do when you receive any information about future announcement?
React immediately
Wait for the conformation
Do nothing
Table-12
Investors React immediately Wait for confirmation Do nothing
Business man(30) 18(60%) 10(33%) 2(7%)
Service man(40) 9(22.5%) 30(75%) 1(2.5%)
Professionals(20) 12(60%) 8(40%) 0()
Student investors(10) 1(10%) 8(80%) 1(10%)
58
Figure-12
From figure-12 following is the analysis:
Out of 30 Business man 18(60%) react immediately and 10(33%) wait for the
confirmation and 2(7%) do nothing regarding the question.
Out of 40 Service man 9(22.5%) react immediately and 30(75%) wait for the
confirmation and 1(2.5%) do nothing regarding the question.
Out of 20 Professionals 12(60%) react immediately and 8(40%) wait for the confirmation
regarding the question.
Out of 10 Student investors 1(10%) react immediately and 8(80%) wait for the
confirmation and 1(10%) do nothing regarding the question.
Consolidated interpretation of data:
1. 40 out of 100 react immediately.
2. 56 out of 100 wait for the conformation.
3. 4 out of 100 do nothing.59
Q:13 For how much time do you think the effect of dividend announcement is on the stock
prices?
Temporary
Atleast few days
Permanent
Table-13
Investors Temporary Atleast few days Permanent
Business man(30) 6(20%) 22(73%) 2(7%)
Service man(40) 5(12.5%) 34(85%) 1(2.5%)
Professionals(20) 4(20%) 16(80%) 0
Student Investors(10) 3(30%) 7(70%) 0
60
Figure-13
From figure-13 following is the analysis:
20% of the Business men think its temporary, 73% think it remains for atleast few days
and 7 % thinks it is permanent.
12.5% of the Service men think its temporary, 85% think it remains for atleast few days
and 2.5 % thinks it is permanent.
20% of the Professionals think its temporary, 80% think it remains for atleast few days
and 0 % thinks it is permanent.
30% of the Student investors think temporary, 70% think it remains for atleast few days
and 0 % thinks it is permanent.
Consolidated interpretation of data:
1. 18 out of 100 say announcement effect is temporary.
2. 79 out of 100 say it remains for atleast few days.
3. 3 out of 100 say it remains permanent.
61
CHAPTER – 362
FINDINGS AND CONCLUSION
FINDINGS
From the secondary data of different companies obtained from the Economic Times clarifies that there is a positive effect of Dividend Announcement on share prices of that sample companies. After announcing of dividend the stock prices tend to rise for few days depending upon the type of company, so throw this the result comes out to be is that Dividend announcement surely pushes the prices of the stock for certain period of time.
There is 100% awareness level among the investors comprising of 100 investors in the proportion of Business man 30, Service man 40, and Professionals 20 and Student investors 10 respectively. All of them are perfectly aware about the Dividend announcements.
This survey also showed that most of the investors prefer large companies for investing i.e. nearly 59% and 27% investors like medium companies for investing, the Business man , Service man and Professionals are the ones who most prefer Large companies for investing and students like small companies for investing due to shortage of available funds,
Internet is the most preferred source for obtaining information regarding dividend announcement followed by Television and Newspaper but a fair amount of investors i.e. 36% uses all of these sources.
According to the investors IT companies are more frequent in announcing their Dividends followed by Banking and Finance companies and Manufacturing companies and it has also
63
been proven from the secondary data of Infosys and Wipro Ltd. That these companies are more frequent in dividend announcement.
This study reveals that most of the investors either they are Business man or Service man or Professionals or Student investors thinks that Dividend Announcement is most effective in pushing the prices of shares with 84% of investors checking this option.
This study also reveals that Change in capital structure and Change in management results into falling of the prices of shares with 70% of investors selecting Change in capital structure and only 24% selecting change in management. Change in capital structure here means splitting f the shares, further issue of new shares, change in proportion of capital structure etc.
According to the interpretation of data post announcement period of dividend announcement results more in influencing the prices of the share and 85% of the investors say so and also the secondary data of the movement of stock prices of companies showed same result.
70 % of the investors have strongly agreed and 27% are agreed with the statement that they go by the announcement before investing in stock market.
56% of the investors have strongly agreed and 28% are agreed with the statement that all the stocks react to dividend announcement but there are 7% investors who don’t agree because of some unforeseen risk in the share market.
72% of investors have strongly agreed and 22 % are agreed with the statement that there investing decision is strongly affected by the Dividend announcements which shows that the investors go by the announcement frequency and timing of the companies before investing.
More than 85% of the investors tend to purchase more share after the announcement is made which surely results in the rise of share prices in the stock market.
40 % of the investors tend to react immediately when they receive information about the future dividend announcement in which most of them are Business man and Professionals who have more funds at disposals and 56 % wait for the conformation, this ratio is high because of more number of service man (40) in sample who have limited funds to invest, so they wait for confirmation and also a major portion of students wait for the conformation.
Around 79 % of the investors said that effect of dividend announcement last for atleast few days and this statement is also supported by the secondary data of the sample companies taken.
64
CONCLUSION
From this research report it is concluded that there is a significant impact of the Dividend
Announcement made by the corporate bodies and it is clear through the data of the sample
companies, however this may become insignificant to some companies as the sample
companies taken are well versed and competent companies, and the movement of graph and
before and after prices of the shares shows that there is positive significance of the Dividend
announcements in stock market.
Through the empirical research conducted from the real time investors proves that they are
strongly aware about the dividend announcement and goes by the announcement before
investing in the share market and also have the deep knowledge of the dividend announcement,
what is its effect, for how much time period a particular stock reflect positive movement after
Dividend announcement is made.
65
LIMITATIONS
1. Time Constraints.
2. Budgetary Constraints.
3. The participants comprised a small sample, which can be generalized across the sector.
66
BIBLIOGRAPHY
RESEARCH PAPER: Bhatia Parul, Lecturer, IILM B-School New Delhi. A STUDY OF DIVIDEND
ANNOUNCEMENTS ON STOCK RETURNS OF POPULARLY TRADED COMPANIES IN INDIA, Volume 1, Issue 3 (December, 2010)
WEBSITE: The Economic Times.com
REFRENCE
ALBOUY & DUMONTIER (1992), La politique de dividendes des entreprises, PUF FINANCE.
BAKER H., FARRELLY G. and EDELMAN R. (1985), A survey of management views on dividend policy, Financial Management, vol 14 N°3.
BEAVER W. (1968), The information content of annual earnings announcements, Empirical
research in accounting. BLACK F. (1976), The dividend puzzle, Journal of Portfolio Management, Vol 2 N°4. BOOTH L. and JOHNSTON D. (1984), The ex-dividend day behavior of canadian stock
prices : tax changes and clienteles effects, Journal of Finance, VOL XXXIX N°2. CHRISTIE W. (1994), Are dividend omissions truly the cruelest cut of all ?, Journal of
Finance and Quantitative Analysis, Vol 29 N°3. DESBRIERES P. (1988), L'effet de clientèle des dividendes sur le marché français : test
67
empirique, FINANCE, Vol 9 N°1. DEWENTER K. and WARTHER V. (1997), Dividends, asymetric information, and
agency conflicts : Evidence from a comparison of the dividend policies of japanese and US firm Working paper.
EADES K., HESS P. and KIM E.H. (1984), On interpreting security returns during the exdividend period, Journal of Financial Economics, 13.
EADES, HESS and KIM (1985), Market rationality and dividend announcements, Journal of Financial Economics, 14.
ANNEXURE
QUESTIONNAIRE ON ANNOUNCEMENT EFFECT
PERSONAL INFORMATION
Name of the respondent: ………………………………………………..
Occupation: …………………………………………………………………….
Gender Male Female
Age 20-30 30-40 ABOVE 40
1. Are you aware about the dividend announcements made by the companies?
Yes
no
2. Which type of companies you most prefer for investing?
Large companies
Medium companies
Small companies
3. Which are the most important sources from which you obtain information about
announcement?
Newspaper
68
Television
Internet
All of these
4. According to you what type of companies are most frequent in announcement of their
dividend?
Manufacturing companies
IT companies
Telecom companies
Trading companies
Infrastructure companies
Banking and Finance companies
5. Which type of announcement you think is most effective in pushing the prices of shares?
Dividend announcement
Buyback
Joint Venture announcement
Change in capital structure
Government acquisition
Change in management
All of these
6. Which type of announcement you think is most effective in falling the prices of shares?
Dividend announcement
Buyback
Joint Venture announcement
Change in capital structure
Government acquisition
Change in management
All of these
7. Which of the following influence the stock prices more?
Pre-announcement
69
Post-announcement
8. Do you go by the announcements before investing in shares of any company?
Strongly agree
Agree
Neutral
Disagree
Strongly disagree
9. Do all the stocks react to dividend announcements?
Strongly agree
Agree
Neutral
Disagree
Strongly disagree
10.Do you think that dividend announcements affect your investing decision?
Strongly agree
Agree
Neutral
Disagree
Strongly disagree
11.What is your action after announcement is made?
You purchase more shares of that company
You sell the shares
Do nothing and wait
12.What do you do when you receive any information about future announcement?
React immediately
Wait for the conformation
Do nothing
13.For how much time do you think the effect of dividend announcement is on the stock prices?
70
Temporary
Atleast few days
Permanent
71