The effects of simultaneous earnings and dividend announcements on shareholders’ wealth. Evidence from the Finnish stock market
Hyvärinen, Miika (2010)
Hyvärinen, Miika
2010
Kuvaus
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Tiivistelmä
The purpose of this thesis is to investigate the possible effects a simultaneously released dividend and earnings announcements may have on the stock price by analysing the return performance of companies listed on the OMXH. Both short- and long-term effects are examined. The companies are grouped into six different portfolios in order to find out whether the market reaction differs with different combinations of dividend and earnings announcements.
The research data includes 773 announcements from a total of 94 companies. The research period investigated in the study covers years 2000-2008. This time span includes various economic cycles. The abnormal return performance of the different portfolios is analyzed during the whole period, after which the period is divided into two additional sub-periods. One is comprised of years, which experienced recession and the other one of years, which experienced an economic boom. The event study-methodology is used in both short- and long-run analysis. The short-run return performance is analysed five days before and after the announcement. The long-run performance is analysed through five different holding periods of different lengths.
At the time of the announcements the abnormal returns were found to be positive with a release of good news and negative with bad news. The Finnish stock market did not fulfil the conditions of the semi-strong form of efficiency as significant abnormal returns were found before and after the announcements. The small size of the Finnish stock market possibly affects the speed with which the new information is incorporated in the prices. The long-run returns revealed that the dividend-earnings announcements are not a good signal of future performance. The companies, which had decreased the dividend and reported lower earnings, earned the largest average abnormal returns after just one quarter and continued to beat the other portfolios during all five examined holding periods.
The research data includes 773 announcements from a total of 94 companies. The research period investigated in the study covers years 2000-2008. This time span includes various economic cycles. The abnormal return performance of the different portfolios is analyzed during the whole period, after which the period is divided into two additional sub-periods. One is comprised of years, which experienced recession and the other one of years, which experienced an economic boom. The event study-methodology is used in both short- and long-run analysis. The short-run return performance is analysed five days before and after the announcement. The long-run performance is analysed through five different holding periods of different lengths.
At the time of the announcements the abnormal returns were found to be positive with a release of good news and negative with bad news. The Finnish stock market did not fulfil the conditions of the semi-strong form of efficiency as significant abnormal returns were found before and after the announcements. The small size of the Finnish stock market possibly affects the speed with which the new information is incorporated in the prices. The long-run returns revealed that the dividend-earnings announcements are not a good signal of future performance. The companies, which had decreased the dividend and reported lower earnings, earned the largest average abnormal returns after just one quarter and continued to beat the other portfolios during all five examined holding periods.