A of two methods, abnormal returns and

February 7, 2019 General Studies

A numerous study on dividend policy has been conduct in past.The dividend policy decision for a firm is very important thus the method that managers attain making dividend policy decisions will impact on the future performance of the firms. The base of dividend debate consists on Modigilani and Miller who said that there is no impact of dividend policy on Firm value or shareholder’s wealth under some assumptions which are irrelevance. They gave a path to other person for the seminal work in this field of finance. It is genrally accepted that dividend announcements are indicative of the future financial performance of the firm. Dividend announcements can be measure by different methods. The Frequently use of two methods, abnormal returns and variability of returns According to signalling theory, a company decides to announce its dividend payout policy to signal the market that the firm is now processing future prospects, which will result in changing its stock prices.Uncertainity of information is the important factor that shows in srcurity price changes that reflect investor’s expectations of risk and return.The basic reason for the study is to examine the variability of return as its measure to ascertain the risk associated with stock return volitality (both short-term and long-term) on announcement of dividend using event study methrdology.
The ‘risk information hypotheses’ proposes the concept of that dividend announcement conveys news regarding the change in firm’s risk. There is decrease in risk when there is reduction in firm’s volitality and earning surprises(Dyl and WEIGAND,1998).There is great volitality when there are chances of increase gain or losses.
The focus of the study is no to eexamone the abnormal returns associated with cash dividend announcements instead it investigates the important aspect of risk in terms of variability of returns.
For understanding this study, it has divided into different sections: Section 1 explaines the Section 2 explaines the literature review Section 3 explains the rationale for the study. Section 4 Covers the Objective and research hypotheses.Section 5 describes the research methodology.Section 6 presents and analyses the result. Section 7 explains the possible explainations or reasons for Stock Volitality and Section 8 contains yhe conclusion of the study.


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