Information Content of Dividend Announcements: An Event Study of Indian Capital Market

Investors are expected to use dividend announcements as a cue while making investment decisions.This study aims to examine the signalling hypothesis of dividends through an empirical investigation of market response to dividend announcements.Data regarding dividend announcements of companies and their respective stock prices are collected from CMIE Prowess database.An event study methodology is used with an estimation period of 120 days and event period of 21 days in total.The results contribute valuable insights into the paradoxical nature of dividends and prove that market reacts to the announcement of dividends.