Asian Journal of Research in Banking and Finance
Year : 2014, Volume : 4, Issue : 4
First page : ( 220) Last page : ( 225)
Online ISSN : 2249-7323.

Analyzing the correlation between the expected dividends and the dividends declared with abnormal stock return

Maghoola Ali

PhD of Financial Management and Member's of Scientific Boards, Department of Management and and Accounting, Neyshabur Branch, Islamic Azad University, Neyshabur, Iran

Online published on 15 April, 2014.

Abstract

Of the factors affecting the stock value trend of a company are signs and indications reflected in the form of announcements from the company that are available to investors. Some of the published data from these business firms are expected dividends and the dividends declared. This accountingearnings information plays a key role in the decision making process of investors to purchase, keep or liquidate their shares. This study attempts to analyze the possible correlation between expected dividends information and that of its dividends declaredwith abnormal stock return. In this regard, the unexpected return and expected dividends are representative of each share's return and its abnormal return, respectively. The sample population in this study included all production companies accepted in Tehran's stock market out of which 50 companies were selected as participants via elimination sampling. The four-year period of 2008 to 2011 was covered by the study. After collecting data from official website of stock market and companies’ CDs, a regression model was used to assess the correlation between independent and dependent variables. Results from data analysis were indicative of a significant direct correlation between the dividends declared of each share with its abnormal return. Also, there was a significant direct correlation between expected dividends per share and its abnormal return. But the correlation of dividends declared to the abnormal return was more significant compared to the correlation of expected dividends and abnormal return.

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Keywords

The expected dividends pershare, dividends, abnormal return per share, expected dividends review, unexpected return.

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