Stock Price Response to Dividend Announcements : (Evidence from National Stock Exchange, India)

The impact of dividend announcements on the share prices has been studied by many researchers. Majority of the studies have revealed that dividend change announcements have a positive association with share returns in the period around the dividend announcement. This study adds to the literature focusing on the shareholders reactions to the dividend announcements. Average Abnormal Returns (AAR) and Cumulative Average Abnormal Returns (CARR) for 30 days prior to the dividend announcement and 30 days post the dividend announcement has been computed using Market Model (MM), Market Adjusted Model (MAM), Mean Adjusted Model (MeAM) and Raw Model (RM) for Interim Dividend Announcements, Final Dividend Announcements and the combination of Interim&Final Dividend Announcements for a period of 4 years from calendar year 2010 to 2013. The findings have confirmed that Dividend announcements affect the returns and the Indian market is inefficient in its semi-strong form.