Impact of dividend announcements on share price performance: evidence from Sri Lankan listed companies

Abstract

The research analyses the share price performance of companies between the periods immediately prior and post their announcing of dividend announcement to have a better understanding of the relationship between dividend announcement and share price performance, which will be critical for every listed company. The impact of dividend was uncovered with the help of two variables; Actual Stock Return and the market return. The date of company announcements and daily share prices were extracted from Colombo Stock Exchange (CSE) data library. Data includes observations from 2016 January to 2018 June. The research method was event study method. According to the research findings, there is a positive significant impact from dividend announcements on share price performance in Sri Lankan listed companies. The contemporary existing ideology of positive impact between dividend announcement and Share Price in Sri Lankan financial market could be re-confirmed through the finding. As the practical implication of the research, strategic decision makers may utilize the findings to ascertain equilibrium for profit distribution through dividends and retain profit for future investments in order to derive short term and long-term growth of the entity.