Thesis (MBA)--Stellenbosch University, 2000. / Dividends are probable the most controversial subject in the finance literature.
Dividends are paid cent for cent from company profits. Besides having tax
implications on the company, they reduce sources of internal finance for the
company. On the other hand, the value of a company is the net present value of
cash flows. Theoretically a company that does not pay dividends now and at
anytime in the future has a value of zero. Companies have dividend policies
applicable to themselves. It is therefore valid to argue that the revision of the
dividend policy has an underlying reason. This study was done to investigate the
effect of unexpected dividend policy changes to daily share price movement. This
study seeks to establish the validity of the much-debated subject of information
significance of dividends. Past studies at most failed to converge to an agreement
on information significance of dividends.
The investigation revealed that there were no significant abnórmal returns earned
on the announcement date on three out of four instances. However the results of
the cumulative abnormal returns revealed that share prices react to dividend
changes during the period of investigation i.e. twenty days before and twenty days
after the announcement. The overall adjustment in share prices over the period
studied is in the same direction as the dividend charge.
The investigation also revealed that price adjustments take place before and after
the announcement date. Price adjustments on the Johannesburg Stock Exchange
were not efficient as compared to adjustments on the New York Stock Exchange.
Share price adjustments on the New York Stock Exchange took place during the
period of a day before and a day after the announcement. The lack of similarity
can be attributed to either sophistication of the market participants or efficiency of
the Johannesburg Stock Exchange.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:sun/oai:scholar.sun.ac.za:10019.1/51805 |
| Date | 12 1900 |
| Creators | Mjacu, Nceba Aubrey |
| Contributors | Biekpe, N., Stellenbosch University. Faculty of Economic & Management Sciences. Graduate School of Business. |
| Publisher | Stellenbosch : Stellenbosch University |
| Source Sets | South African National ETD Portal |
| Language | en_ZA |
| Detected Language | English |
| Type | Thesis |
| Format | 106 p. : ill. |
| Rights | Stellenbosch University |
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