Examining the effect of dividend policies on shareholders of publicly listed companies in Singapore

• Main Authors: Tan, Si Ying, Kam, Hui Ling
• Other Authors: Liu Wei-Lin
• Format: Final Year Project
• Language: English
• Published: 2011
• Subjects: DRNTU::Business::Finance::Dividends
• Online Access: http://hdl.handle.net/10356/44141
• Institution: Nanyang Technological University

This study delves into the analysis of shareholders’ preferences for different dividend policies, namely cash and stock dividends. Shareholders of publicly listed companies in Singapore will be examined by varying the dividend policies and identifying whether any abnormal returns exist. Company-specific factors will also be taken into account for their effect on stock prices, as well as how each of them contributes to the announcement effect. As this study is purely exploratory in nature, the data will be obtained via secondary sources and analyzed accordingly. Findings revealed that on average, increases in dividend per share led to a positive cumulative abnormal return while decreases in dividend per share led to a negative cumulative abnormal return. This might be due to various dividend policies such as the bird-in-the-hand fallacy as well as the signaling effect, which overall contributes to the announcement effect where cash dividends are thought to affect stock prices. In this report, we will investigate and reveal the results for how true these theories are in a Singapore context. The main limitation of this study was the time constraint, limiting our sample size due to the extensive amount of data needed to be collected. Further research can explore the interaction effect of other relevant factors on the announcement effect in fuller details, as well as for non dividend-paying companies.