INTRODUCTION:

Dividend policy is one of the most widely researched topics in the field of finance but the question whether dividend policy affects stock prices still remains debatable among managers, policy makers and researchers for many years. Dividend policy is important for investors, managers, lenders and for other stakeholders. It is important for investors because investors consider dividends not only the source of income but also a way to assess company from investment point of view. Selecting a suitable dividend policy is an important decision for the company because flexibility to invest in future projects depends on the amount of dividends that they pay to their shareholders. If a company pays more dividends then fewer funds available for investment in future projects.

Lenders are also interested in the amount of dividend that a company declares, as more amount is paid as dividend means less amount would be available to the company for servicing and redemption of their claims and finally it is important for other stakeholders especially for claimholders to help them in reducing agency cost. For a company listed on the stock exchange, a number of factors exist which affect the creation of shareholder wealth as far as the dividend share price matrix is concerned. Regarding stock price, most researchers in their various studies suggest that the share price is mostly affected by the variables of dividend yield, retention ratio, profit after tax, earnings per share, and return on equity. Amongst the outlined variables, it is shown through a number of studies that dividend policy, (which determines how much of the profit to pay out as dividends, and how much to retain), has a significant influence on the stock price of an entity as it trades on the stock market.

The study will investigate the impact of dividend declaration on stock return of selected firms listed at National Stock Exchange. To accomplish this objective, the paper is divided into sections. The next section of the paper reviews the literature so far published on areas related to the one under review. The last section presents the results and the analysis of the findings, and finally, there is a summary and conclusion section.

REVIEW OF LITERATURE:

Thanwarat Suwanna has conducted a study focusing on the impact of dividend announcement of 60 Thai companies in financial industry listed in the stock exchange of Thailand during the period 2005-2010. The study examines the effect of dividend announcement on the stock prices surrounding forty days of announcement and found that dividend signaling theory as the dividend announcement have significant impact on share prices.

Sachin Sanechi Mothlagh et. al. (2016) has studied the relationship between market value in determining the abnormal yield of the accepted company’s share in stock exchange for a period of 10 years (2004-2013). The results imply the confirmation of the negative relationship between book value of the properties and the market value of the total assets.

Mohammad Bayezid Ali et. al. (2010) examines stock price reactions of listed private commercial banks in Bangladesh surrounding 44 days of the dividend announcement dates. The study revealed that out of 25 listed sample banks in the observation period, market adjusted stock price declines for 11 banks, rises for 6 banks and no changes for 8 banks and statistical pooled t-test also reveals that stock price reaction to dividend announcement are not statistically significant.

Kanwal Iqbal Khan (2012) has conducted the study to test the effect of dividend announcements on stock prices of chemical and pharmaceutical industry of Pakistan by taking a sample of 29 companies listed at KSE-100 index from the period of 2001 to 2010. The study revealed that stock dividend, earnings per share and profit after tax have significant positive relation to stock market prices while retention ratio and return on equity have negative insignificant relation with stock prices.

Edward Attah-Botchwey (2014) finds out the impact of dividend payment and its relationship on the share price of some listed companies on the Ghana stock exchange by taking a total of 60 shareholders into consideration. It was found that, as the dividends of companies’ increase, the share price also rises due to the pressure on share.

Roza Irandoost et. al. (2013) assess the effect of dividend policy on stock price volatility and investment decisions by selecting 65 firms from Tehran stock exchange for a period of 3 years from 2007-2012. The result indicate that the dividend policy have a significant effect on stock price volatility in a long run.

Yusniliyana Yusof and Suhaiza Ismail (2014) investigate the determinants of dividend policy of public listed companies in Malaysia by selecting 147 listed companies. The results revealed that the factors such as earnings, debt, size, investment and largest shareholder have a significant influence on dividend policy. Earnings, size and investment revealed to have a positive significant effect, while debt and large shareholders have a negative significant effect.

Lilian Luvembe et. al. (2014) determines whether capital structure, corporate earnings, dividend payout ratio and capital market investments have any effect on market value among listed banks in Kenya. The study was conducted for the period between 2006 and 2010. The study found a significant and positive relationship between market value and capital structure, corporate earnings, dividend payout ratio and capital market investments in most of the years.

S. M. Tariq et. al. (2012) attempts to analyse the impact of dividend on shareholders wealth of 11 selected Indian banks listed actively traded in National Stock Exchange during the period 2006 to 2010. Gilt schemes are seen to have been positive. The observed positive performances of the selected schemes are not statistically significant.

OBJECTIVES OF THE STUDY:

· To study the dividend declaration and its effect on share prices of selected cement firms listed at NSE.

· To know and understand the dividend policies and factors that are affecting dividend.

· To analyse the positive or negative influence of dividend policy on share price.

Dividend decision:

Dividend decision refers to the procedure that the management defines concerning income for appropriation as profits among shareholders. The Dividend decision, in corporate is taken by the top level management, board members, and executives of the organization about the amount of payment and time and date of payment to the organization stakeholders. The dividend decision has vital role in the present commercial world. The dividend decision is important for the company as it might impact its capital structure and stock cost. The dividend decision may measure amount of taxation that stockholders pay. Dividend announcement is company‘s another essential area of financial management. When dividend decision is considered as a financing decision, the net profit of firm may be treated as a source of long term funds. The imperative part of dividend policy is to decide the measure of income to be distributed to shareholders and the total to be retained in the firm. Retained earnings are the most important inward sources of financing the development of the firm. On the opposite side, dividends might be considered attractive from shareholder‘s perspective. Dividend declaration naturally encourages investors to purchase stock. Many people invest in certain stocks at certain times solely for the purpose of collecting dividend payment. Some investors purchase shares just before the ex-dividend date and then again right after the date of record- a tactic that can result in a tidy profit if it is done correctly.

METHODOLOGY:

To examine the impact of dividend announcement on the stock return, the stock return of the selected cement firms surrounding 15 days of the date of dividend announcement listed at NSE are taken into consideration. The entire range of discussions has been made on the basis of secondary sources. Sources from journals, newspaper, research projects and related websites were read and analysed to compile the paper.

Analysis and Findings:

The analysis is done by taking four firms in the cement industry listed at the National Stock Exchange to know the impact of dividend declaration on stock return.

ACC CEMENT:

Table 1: showing dividend information for the period of 15 days before and after dividend declaration

Before dividend declaration (15 days)			After dividend declaration(15 days)
Date	Closing Price	Return (%)	Date	Closing Price	Return (%)
12/7/16	1620.1	0.2041	03/8/16	1668.8	-0.1167
13/7/16	1617.2	-0.1790	04/8/16	1666.25	-0.1528
14/7/16	1626.2	0.5565	05/8/16	1721.05	3.2888
15/7/16	1613	-0.8117	08/8/16	1715.15	-0.3428
18/7/16	1595.5	-1.0849	09/8/16	1685.95	-1.7025
19/7/16	1602.55	0.4419	10/8/16	1618.9	-3.9770
20/7/16	1631.8	1.8252	11/8/16	1618.4	-0.0309
21/7/16	1708.2	4.6819	12/8/16	1652.5	2.1070
22/7/16	1681.55	-1.5601	16/8/16	1663.85	0.6868
25/7/16	1675.65	-0.3509	17/8/16	1675	0.6701
26/7/16	1675.55	-0.0060	18/8/16	1692.7	1.0567
27/7/16	1665.15	-0.6207	19/8/16	1691.2	-0.0886
28/7/16	1685.1	1.1981	22/8/16	1660.95	-1.7887
29/7/16	1688.7	0.2136	23/8/16	1654.65	-0.3793
01/8/16	1688.85	0.0089	24/8/16	1647.4	-0.4382

AMBUJA CEMENT:

Table 2: showing dividend information for the period of 15 days before and after dividend declaration

Before dividend declaration (15 days)			After dividend declaration (15 days)
Date	Closing Price	Return (%)	Date	Closing Price	Return (%)
12/7/16	260.8	0.0575	03/8/16	262.5	-0.5117
13/7/16	260.6	-0.0767	04/8/16	264.4	0.7238
14/7/16	262.65	0.7866	05/8/16	275.9	4.3495
15/7/16	260.85	-0.6853	08/8/16	276.5	0.2175
18/7/16	259.95	-0.3450	09/8/16	270.5	-2.1700
19/7/16	262.7	1.0579	10/8/16	260.45	-3.7153
20/7/16	262	-0.2665	11/8/16	259.7	-0.2880
21/7/16	265.9	1.4885	12/8/16	264.5	1.8483
22/7/16	265.05	-0.3197	16/8/16	269.65	1.9471
25/7/16	269	1.4903	17/8/16	269.75	0.0371
26/7/16	269.8	0.2974	18/8/16	272.1	0.8712
27/7/16	268	-0.6672	19/8/16	276.45	1.5987
28/7/16	271.55	1.3246	22/8/16	271.3	-1.8629
29/7/16	271.25	-0.1105	23/8/16	271	-0.1106
01/8/16	271	-0.0922	24/8/16	267.1	-1.4391

INDIAN CEMENT:

Table 3: showing dividend information for the period of 15 day before and after dividend declaration

Before dividend declaration (15 days)			After dividend declaration (15 days)
Date	Closing Price	Return (%)	Date	Closing Price	Return (%)
28/7/16	123.25	6.2958	22/8/16	129.5	-1.9311
29/7/16	124.35	0.8925	23/8/16	140.1	8.1853
01/8/16	121.35	-2.4125	24/8/16	144.75	3.3191
02/8/16	117.7	-3.0078	25/8/16	143.75	-0.6908
03/8/16	116.2	-1.2744	26/8/16	144.7	0.6609
04/8/16	116.55	0.3012	29/8/16	143.25	-1.0021
05/8/16	123.15	5.6628	30/8/16	151.4	5.6894
08/8/16	125.05	1.5428	31/8/16	149.8	-1.0568
09/8/16	125.3	0.1999	01/9/16	151.15	0.9012
10/8/16	119.55	-4.5890	02/9/16	152.35	0.7939
11/8/16	122.35	2.3421	06/9/16	155.7	2.1989
12/8/16	121.55	-0.6539	07/9/16	153.75	-1.2524
16/8/16	120.9	-0.5348	08/9/16	154.1	0.2276
17/8/16	123.8	2.3987	09/9/16	149.4	-3.0500
18/8/16	125.7	1.5347	12/9/16	142.25	-4.7858

ULTRA TECH CEMENT:

Table 4: showing dividend information for the period of 15 days before and after dividend declaration

Before dividend declaration (15 days)			After dividend declaration (15 days)
Date	Closing Price	Return (%)	Date	Closing Price	Return (%)
13/6/16	3397.9	0.3915	05/7/16	3375.15	-0.9973
14/6/16	3321.9	-2.2367	07/7/16	3382.4	0.2148
15/6/16	3363.75	1.2598	08/7/16	3400.05	0.5218
16/6/16	3281.85	-2.4348	11/7/16	3454.55	1.6029
17/6/16	3303.05	0.6460	12/7/16	3487.3	0.9480
20/6/16	3369.55	2.0133	13/7/16	3434.65	-1.5098
21/6/16	3357.6	-0.3546	14/7/16	3500.6	1.9201
22/6/16	3311.2	-1.3819	15/7/16	3531.35	0.8784
23/6/16	3337.95	0.8079	18/7/16	3498.45	-0.9317
24/6/16	3289.95	-1.4380	19/7/16	3507.75	0.2658
27/6/16	3396	3.2235	20/7/16	3559.85	1.4853
28/6/16	3400.8	0.1413	21/7/16	3638.5	2.2094
29/6/16	3395.25	-0.1632	22/7/16	3639.7	0.0330
30/6/16	3411	0.4639	25/7/16	3670	0.8325
01/7/16	3424.1	0.3841	26/7/16	3628.3	-1.1362

Table 4.1 showing values of Ultra tech cement before and after 15 days of dividend declaration in the year 2016.

Time Period	Mean	Standard Deviation	Correlation Co-efficient
Before dividend	0.0881	1.5255	-0.27641
After dividend	0.4225	1.1604

Interpretation:

The above table shows the share prices of Ultra tech cement for a period of 15 days before and after dividend declaration along with the standard deviation. The standard deviation denotes 2.9499 during the before dividend declaration period and 1.1604 during the after dividend declaration period. Correlation co-efficient is-0.2764. From the analysis it can be inferred that the price of Ultra tech cement showed increased response during the before dividend declaration period compared to after dividend declaration period.

FINDINGS:

· ACC cement has less returns with less risk before dividend declaration and less returns with less risk after dividend declaration whose standard deviation are 1.4815 and 1.682 and the correlation coefficient is 0.7208 for the year 2016.

· Ambuja cement has less returns with less risk before dividend declaration and less returns with high risk after dividend declaration whose standard deviation are 0.7662 and 1.9689 and, the correlation coefficient is-0.23062 for the year 2016.

· Indian cement has less returns with high risk before dividend declaration and less returns with high risk after dividend declaration whose standard deviation are 2.9449 and 3.3033 and correlation co-efficient is 0.13.

· Ultra Tech cement has less returns with less risk before dividend declaration and less returns with less risk after dividend declaration whose standard deviation are 1.5255 and 1.1604 and correlation co-efficient is-0.27.

CONCLUSION:

The study aims at investigating the impact of dividend decision on stock return of selected firms of cement industry listed at National Stock Exchange. The daily share price is considered for a period of 15 days before the dividend declaration and 15 days after dividend declaration of 4 different firms of cement industry are selected for study. Based on the findings, it was realised that as dividend increases, share price rises. This is due to theory behind demand. If dividend rises, more investors increase their shares and, all else being equal, the share price also increases and vice versa. The conclusion to be drawn is that dividend declaration has impact on share price, at least, the case for the selected listed firms on the National Stock Exchange for the period under study. Findings from the study suggest that companies’ dividend payment determine the value of shares. It must be noted, however, that only an aspect of dividend payment and impact on and share price was looked at. More studies should be conducted to find out what factors affect the share price aside dividend payment. From the numerous literatures written on dividend policy, it was found out that companies that have a long standing history of stable dividend pat-out would be affected by increasing dividend payment of the other companies.

REFERENCES:

1. Thanwarat Suwanna (2011): Impact of dividend announcement on stock return. Elsevier Procedia-Social and Behavioural Sciences 40 (2012) 721-725.

2. Shahin Sanechi Mothlagh, Fateme Samadi, Zohre Hifiha: The relationship of the context of the market value in the explanation of abnormal stock returns of listed companies in Tehran Stock Exchange. Elseiver Procedia Economics of Finance 36 (2016) 113-121.

3. Mohammad Bayezid Ali, Tanbir Ahmed Chowdhury: Effect of dividend on stock price in emerging stock market: A study on the listed private commercial banks in DSE. International Journal of Economics and Finance, Vol. 2, No.4, November 2010.

4. Kanwal Iqbal Khan (2012): Effect of dividends on stock prices-A case of chemical and Pharmaceutical industry of Pakistan. Published online at http://journal.sapub.org/mm management 2012, 2 (5):141-148.

5. Edward Attah-Botechwey (2014): The impact of dividend payment on share price of some selected listed companies on the Ghana Stock Exchange: International Journal of Humanities and Social Sciences, Vol. 4, No.9, July 2014.

6. Roza Irandoost, Rasoul Baradaran Hassanzadeh, Heydar Mohammad Zahed salteh: The effect of dividend policy on stock price volatility and investment decisions. European Online Journal of Natural and Social Sciences, 2013, Vol. 2, No. 3 (5), p.p. 51-59, ISSN 1805-3602.

7. Yusniliyana Yusof and Suhaiza Ismail: Determinants of dividend policy of public listed companies in Malaysia. Emerald Insight. Review of International Business and Strategy, Vol. 26, Issue 1, p.p. 88-99.

8. Lilian Luvumbe, Mungai John Niangiru, Dr. Eddie Simiyu Mugami (2014): Effect of dividend payout on market value of listed banks in Kenya. International Journal of Innovative Research and Development, vol. 3, Issue 11, November 2014.

9. S. M. Tariq Zafar, D. S. Chanber and S. M. Khalid (2012): A study on dividend policy and its impact on the shareholders wealth in selected banking companies in India. International Journal of Financial Management, Vol. 2, Issue 3, July 2012.

Received on 20.03.2018 Modified on 09.04.2018

Asian Journal of Management. 2018; 9(3):1085-1089.

DOI: 10.5958/2321-5763.2018.00172.5