Impact of Cash Dividend Announcements: Evidence from the Indian Manufacturing Companies

Abstract

According to a recent survey by McKinsey and Company, the Indian manufacturing sector is expected to touch US$ 1 trillion by 2025.This study analyses the impact of the announcement of cash dividends on the stock price returns of the manufacturing companies listed on Bombay Stock Exchange using event study methodology. Further, it explores whether the US financial crisis recession impacted average abnormal returns (AARs) in the period of study. The empirical results show that cash dividend announcements have positive AARs. Overall, the results lend support to the signalling and informational content hypotheses of dividends. The paired samples t-test indicates a significant difference in the mean values of AARs in the pre-and post-recession phases, highlighting the impact of recession.

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