The impact of dividend yield on cash dividends in emerging markets an empirical analysis

Abstract

This research paper attempts to test whether the dividend yield or dividend size has more impact on stock prices and investigate whether the Colombo Stock Exchange (CSE) is semi-strong-form efficient. To achieve the objectives hypothesis were developed for testing. 'The sample included cash dividend announcements from 42 companies over a period of twele years from 1995 to 2006. The study has sample size of only 50announcement dates for dividend announcements. To investigate the standard event study methodology is used. In this study an estimation of 100 days an event window of 21 days are used. The study found (hat the dividend yield has more impact on stock price than dividend size. The analysis saw that the CSV: is informationally inefficient. So, it has important implications for the investors, managers of companies and stock market regulating agencies. The results are not merely due to the impact of cash dividends. The factors other than announcements such as economical political and other market conditions also have impact on the share prices.