The Impact of Dividend Announcement on Share Price: Empirical Evidence from the Colombo Stock Exchange

Abstract

The purpose of this study was to analyse the impact of dividend announcement on share price
with special reference to the beverage, food, and tobacco sector in Colombo Stock Exchange,
during the period of five years from 1st January 2015 to 31st December 2019. The event
study methodology was used to examine the impact of the dividend announcement on the
share price. The event window was considered 11 days, which means 5 days prior and
subsequent to the announcement, along with the announcement date and the independent
sample T-test was used to analyse the results to check whether the two unrelated groups,
before the announcement date and after the announcement date were statistically significant
or not. The result indicated that there was no statistically significant difference between the
share prices before the announcement date and after the announcement date. The literature
provides a strong theoretical background to the findings of this study and it concludes with
some special reasons to the Sri Lankan context that caused the result. When developing this
study, there may be some inherent limitations. Therefore, it is essential to provide
recommendations as to the guidelines for future researchers, undergraduates, and students to
avoid those limitations. The implications of this research will be important for several parties
all across the world. The results of this study will fulfil the inadequacy and inapplicability of
present and prevailing knowledge related to dividend announcement and share price with
special reference to the beverage, food, and tobacco sectors on the Colombo Stock Exchange.

Keywords: Colombo Stock Exchange, Dividend Announcement, Event Study,
Independent Sample T-Test, Share Price