Dividend increase announcements and stock market reaction : evidence from Canadian stock market

Abstract

This paper examines and analyzes the effect of the increase in dividend announcements on the stock price on the Toronto Stocks Exchange, by selecting 50 firms from different sectors which announce increases in dividends during the period of 2001 to 2010. The focus in this study is analyzing the effect of the event in short periods of time (3 days, 7 days and 11 days). As expected, the study finds that most firms have a positive relationship between the increase in dividends and stock price. However, there was a negative relationship between the stock price of some firms and the increase in dividends. In conclusion, this study finds that the increase in dividend announcements does affect stock prices. However, investors cannot make abnormal returns due to this event.