Market reactions to dividends announcements and payouts. Empirical evidence from the Warsaw Stock Exchange

Urszula Mrzygłód , Sabina Nowak


The main goal of this paper is the empirical examination of the Polish stock market reactions to dividend announcementsand dividend payouts made by the companies listed on the Warsaw Stock Exchange (WSE). The researchsample comprises 56 companies (WIG index constituents) that announced dividend payments and completedthe payout during 2013. In the analysis, event study methodology is employed including either calculatingabnormal returns and cumulative abnormal returns around the event day or testing their statistical significanceusing parametric and nonparametric tests. The average cross-sectional abnormal return calculated for the entiresample is found to be significant on the dividend announcement day (t = 0, 0.86%) and on one day after (t = +1,0.59%) at the 1% and 10% significance levels, respectively. The outcomes of the analysis conducted within thethree distinguished subsamples are rather more diverse. In the subgroup of the first announced dividends (ordividends announced after a minimum one-year break), the significant average abnormal return is found on dayt = +1 (0.90%, 5% significance level), whereas in the case of the dividend decreases subsample, the significant averageabnormal returns (at the 10% significance level) occur on days t = −4 (-1.44%) and t = +2 (-1.15%). The averageabnormal return calculated within the subsample of dividend increases turns out to be positive and significanton day t = +1 (1.03%, 10% significance level). The results obtained for the average cumulative abnormal returnscorroborate the findings reached for the average cross-sectional abnormal returns in the case of the first dividendand dividend increase subsamples. However, the average cross-sectional abnormal returns calculated within theeleven-day-long event window around the dividend payment day turn out to be statistically insignificant. Theobtained results provide evidence that the Polish stock market reaction to dividend announcements is positiveand immediate. However, the market does not significantly react to dividend payouts, which may lead to theconclusion that the WSE directly incorporates news on dividends into stock prices. Moreover, the reaction of themarket for dividend announcements is consistent with the sign of the dividend change: dividend-increase (-decrease)announcements are interpreted as a positive (negative) signal by the investors. Such results support boththe informational content of the dividend hypothesis and the dividend signaling hypothesis. Considering thatthe observed abnormal market behavior disappears within two days at most after the announcement date, theresults of the study can be useful for financial practitioners only with regard to short-term investment decisions.
Author Urszula Mrzygłód (FE / IIB)
Urszula Mrzygłód,,
- Institute of International Business
, Sabina Nowak (FM / DE)
Sabina Nowak,,
- Department of Econometrics
Journal seriesContemporary Economics, ISSN 2084-0845, e-ISSN 2300-8814, [1897-9254], (B 15 pkt)
Issue year2017
Publication size in sheets0.85
Keywords in Englishdividends, stock prices, event study, Warsaw Stock Exchange
ASJC Classification2000 General Economics, Econometrics and Finance
Languageen angielski
LicenseJournal (articles only); published final; Uznanie Autorstwa (CC-BY); with publication
Score (nominal)15
ScoreMinisterial score = 15.0, 24-07-2019, ArticleFromJournal
Publication indicators Scopus SNIP (Source Normalised Impact per Paper): 2016 = 0.379
Citation count*6 (2019-08-14)
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* presented citation count is obtained through Internet information analysis and it is close to the number calculated by the Publish or Perish system.