Share price reaction to dividend announcements in Bursa Malaysia surrounding the COVID-19 period

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Chen, Wan Chuen (2024) Share price reaction to dividend announcements in Bursa Malaysia surrounding the COVID-19 period. [Dissertation (University of Nottingham only)]

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Abstract

The general objective of this study is to investigate the share price reaction towards dividend announcement in Bursa Malaysia before, during and after COVID-19 periods. Dividend signalling theory, efficient market hypothesis and behavioural finance hypothesis are applied with effect of health crisis being taken into account. To examine the validity of dividend theories, event study methodology is employed. The results showed that dividend signalling theory holds before and during COVID-19 periods, but the theory hold at certain level after health crisis. It is also found that there is leakage of insider information before dividend is announced.

In addition, this study analyses share price reactions to various dividend distribution trends, including dividend increases, dividend decreases and constant dividends. The results displayed that investors overreact to dividend increase but underreact to dividend decrease announcement. Within post-COVID-19 period, investors become more risk adverse and amplified the bad news of dividend decrease. The results also showed that constant dividend announcement have significant impact on stock price reaction. Furthermore, the portfolio's risk reaction to dividend announcements while considering the influence of COVID-19 pandemic is also assessed. The results presented that the risk level of stocks and portfolio during COVID-19 is proved to be higher than that under normal market condition due to higher market sentiment during health crisis. Through understanding the validity of dividend signalling theory with health crisis effect being considered, investors would be able to create new investment strategies in stock market and protect themselves with better investment decisions to deal with similar economy situation later.

Item Type: Dissertation (University of Nottingham only)
Depositing User: Chen, Wan
Date Deposited: 12 Mar 2024 02:36
Last Modified: 12 Mar 2024 02:36
URI: https://eprints.nottingham.ac.uk/id/eprint/76062

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