Ex-Date Stock Price Adjustment to Stock Dividends: A Note

Woolridge, J. Randall

doi:10.2307/2327652

Cited by 25 publications

(16 citation statements)

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“…The results of their studies are similar to those reported by FFJR (1969) and support the notion that share prices react to stock dividend announcements (see Woolridge, 1983;Grinblatt et al, 1984;Lamoureux and Poon, 1987;Doran and Nachtmann, 1988;McNichols and Dravid, 1990;Banker, Das and Dater, 1993;Aydogan and Muradoglu, 1998;Olowe, 1998;Anderson, Cahan and Rose, 2001;Elfakhani and Lung, 2003;Balachandran, Faff and Tanner, 2004;Farinha and Basilio, 2006;Leung, Rui and Wang, 2006;Lyroudi and Dasilas, 2006;Bechmann and Raaballe, 2007;and Dhar and Chhaochharia, 2008). [1] Despite this weight of evidence, a non-US study covering the period 1981-94 by Papaionnou, Travlos and Tsangarakis (2000) on the share price reaction to stock dividends in Greece did not find any evidence in support of a share price reaction.…”

Section: Literature Reviewsupporting

confidence: 87%

“…However, contrary to their theoretical assumption, empirical studies of the impact of stock dividends on share prices show that significant price reactions occur on the announcement day (see e.g. Fama, Fisher, Jensen and Roll [hereafter FFJR] 1969;Grinblatt, Masulis and Titman, 1984;Liljeblom, 1989;McNichols and Dravid, 1990;and Woolridge, 1983).…”

Section: Introductionmentioning

confidence: 99%

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The stock market reaction to stock dividends in Nigeria and their information content

Campbell

Ohuocha

2011

Managerial Finance

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Purpose -To examine whether stock dividend announcements create value for companies traded on the Nigerian stock market and to ascertain the nature of the information such announcements convey.Design/methodology/approach -A standard event study methodology, employing the market model, is applied to determine the abnormal returns both on and surrounding the stock dividend announcement date. Our sample is broken down based on the timing of announcements and on the frequency with which the announcing companies' shares are traded. We also examine the information content of stock dividends by applying the chi-square technique to test the level of association between earnings, cash dividends and stock dividends.Findings -Our study suggests that companies that choose their own announcement date outside the Nigerian stock exchange announcement window experience positive abnormal returns if their stock is more frequently traded and negative abnormal returns if their stock is less frequently traded. In addition, support is found for both the cash substitution hypothesis and the signalling hypothesis as explanations for the information stock dividends convey to shareholders.Research limitations/implications -The small number of companies in the 'early announcement' group may not permit a definitive view to be established about the stock market reaction to early stock dividend announcements for this group of companies.Practical implications -The findings are of practical relevance to researchers, practitioners and investors interested in companies listed on the Nigerian stock market as they reveal the extent to which the shares reflect fundamental information from corporate announcements.Originality/value -This study adds to the very limited academic research on the stock market reaction to stock dividend announcements in Nigeria.

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Section: Literature Reviewsupporting

confidence: 87%

Section: Introductionmentioning

confidence: 99%

The stock market reaction to stock dividends in Nigeria and their information content

Campbell

Ohuocha

2011

Managerial Finance

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“…in Ohlson and Penman (1985), and to some potential ex-coupon effects, see e.g. Woolridge (1983) and Ginblatt, Masulis and Titman (1984). This standard deviation is calculated as s = d C ( A ,~A )~/ 2 4 5 where A, is the average excess return for a day during the estimation period and A is the mean over the estimation period of these average excess returns.…”

Section: Discussionmentioning

confidence: 99%

“…Subsequent studies give evidence on the informational impact of 'pure' stock dividend and/or stock split announcements. Foster and Vickerey (1978) and Woolridge (1983) find significant stock price adjustments on the declaration dates of stock dividend announcements for a sample of firms that had no additional announcement recorded. In Grinblatt, Masulis and Titman (1984), a large sample of announcements of both stock dividends and stock splits are analysed.…”

Section: Introductionmentioning

confidence: 99%

The Informational Impact of Announcements of Stock Dividends and Stock Splits

Liljeblom¹

1989

Business Fin & Account

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“…Hence, the stock price should adjust on the ex-dividend day only to the level justified by the stock dividend percentage. Woolridge (1983b) tests this theoretical prediction and finds that the price adjustment is less than what is consistent with the stock dividend percentage. Moreover, he finds that stocks with smaller stock dividend percentages have higher excess returns.…”

mentioning

confidence: 91%

Valuation Effects of Greek Stock Dividend Distributions

Papaioannou

Travlos

Tsangarakis

2000

Euro Fin Management

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This study analyses the price reaction to stock dividend distributions by firms listed on the Athens Stock Exchange on both the announcement and the ex-dividend day. It also analyses earnings per share, dividends per share and trading volume in the pre-and post-announcement periods. The findings show statistically insignificant abnormal returns on both the announcement and the ex-dividend day. The analysis does not reveal any significant change in earnings per share and dividends per share, but it does reveal a significant decline in the market-adjusted trading volume in the post dividend period. The findings, based on a different institutional environment, expand the empirical evidence on the value effects of stock dividends.

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Ex-Date Stock Price Adjustment to Stock Dividends: A Note

Cited by 25 publications

References 0 publications

The stock market reaction to stock dividends in Nigeria and their information content

The stock market reaction to stock dividends in Nigeria and their information content

The Informational Impact of Announcements of Stock Dividends and Stock Splits

Valuation Effects of Greek Stock Dividend Distributions

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