Dividend Announcement and Abnormal Return :An Applied Study on Banking Shareholding Firms in Amman Bourse

Abstract

This study aims to test the effect of dividend  announcement on stock prices on banking shareholding companies, and investigating the information content of this announcement  on either stock prices and trading volumes. it is also aims to investigate the ability of investors to earn abnormal return by using these information.The behaviour of stock prices is studied on the basis of monthly  or weekly movements. On this paper an attempt was made to analyze the daily stock prices of banking shareholding companies listed in Amman bourse using CAPM model in order to  estimate the normal return and the percentage change of daily stock prices in order to estimate  the actual return.The hypothesizes of the study were examined by  using parametric tests as one-sample test and paired sample to test. it was found that there was no information content to  these dividends'  announcements on stock  prices and investors couldn’t neither use information to beat the market nor earning abnormal return .This study can be a source of help to  market makers  to improve either way of timing their decision to buy and sell stocks or the way of analyzing dividend announcement content . and it is also a source of  help to potential and current investors  to improve their understanding and reading of these announcements .

Keywords:return(excess return),normal: dividend announcements ,stock prices, abnormal return ,CAPM,under reaction,over reaction

DOI: 10.7176/RJFA/10-18-03

Publication date:September 30^th 2019