Share Price Behavior and Dividend Announcements by listed Companies- An Evidence from Indian Stock Market

Abstract

Dividend announcements symbolize one of the most substantial corporate verdicts intended at improving shareholder value. The price fluctuation surrounding pay-out announcements have long been a concentration of financial exploration, drawing attention from researcher, academicians, and professional, seeking to recognize the associations of corporate pay-out with share prices. These inspections predominantly aim to examine the semi-strong variant of the Efficient Market Hypothesis (EMH). The present research probes share price volatility surrounding dividend declarations for a sample of 82 firms listed in India, over the time span between April 2021 to March 2025. The present inspection employs the Ordinary Least Squares (OLS) regression model to calculate the alpha and beta coefficients, which are successively used to compute the Average Abnormal Return (AAR), Cumulative Abnormal Return (CAR), and Cumulative Average Abnormal Return (CAAR). The S&P BSE 500 indices is used as the market benchmark for figuring anomalous returns. An estimation window of 120 days (ranging between from −150 to −30 days) and an event window of 61 days (ranging between from −30 to +30 days) are applied for the event study analysis. The empirical finding specify that the AAR on the declaration day is 0.87%, whereas the CAAR for the event window is 2.52%. These outcomes propose an apparent positive valuation effect attributed to pay-out declaration thereby supporting the belief that such declaration subsidize to shareholder wealth formation. Therefore, the research concludes that pay-out declarations exert a favourable impression on the stock prices of Indian listed companies.