A comparison of stock market reactions to dividend increase announcements in the US and China financial industry

Abstract

This paper investigates into the effect of dividend increase announcements to US and China financial market by selecting 30 stocks in Shanghai Stock Exchange and 40 stocks in New York Stock Exchange during the period of 2006 to 2013. The purpose of this research is analyzing the effects of events in short-term event window, which are 5-day event window, 11-day event window, 21-day event window and 61-day event window. We find out that most firms in both China and US financial markets are positively related to the dividend increase announcement but US financial companies seems to have slower reaction speed and longer reaction period. In conclusion, dividend increase announcements have positive abnormal effects to both US and China financial markets but the two markets react increase differently. Investors can only obtain abnormal returns in 30 days after the dividend announcements in China financial markets and can only obtain abnormal returns 10 days after the dividend announcements in US financial markets.