DIVIDEND ANNOUNCEMENT IMPACTS PERFORMANCE AND VOLATILITY OF THE STOCK

DIVIDEND ANNOUNCEMENT IMPACTS PERFORMANCE AND VOLATILITY OF THE STOCK

M.Sirisha

Master of business Administration, Mallareddy University, Hyderabad

                                                                         ABSTRACT

The estimation of a firm’s stock price has been a subject of debate considering the various factors that cause its increase or decrease. Chief among the outstanding factors touted by most scholars is the amount of dividends declared by the firm to its stockholders. This study aims at establishing if there exists such a direct relationship between a firm’s dividends and its stock price . The study analyses secondary data sets of some companies related to banking industry and IT listed on the Stock Exchange.

It includes both NSE and BSE for the period 2018 to 2022 inclusive., the study shows a strong positive association between stock price and Dividend.  Dividend decisions are important because they determine what funds flow to investors and what funds are retained by the firm for investment. There is a strong positive relationship between a firm’s dividends and its stock price on the stock market. The study further finds that stock price is an outcome of a number of factors, dividends being one of them and having a very significant contribution.

The findings in this study will help investors, both potential and existing; as well as managers of listed companies, who are the stewards, to understand and appreciate the impact of dividend declaration or absence of it, on the psychology of stockholders which later affects the respective company’s stock price on the stock exchange.