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Investigating the reaction of the stock market to the cash dividend announcements in the Tehran Stock Exchange

Number of pages: 118 File Format: word File Code: 31245
Year: 2014 University Degree: Master's degree Category: Management
Tags/Keywords: Business management - capital - Capital market - Cash dividend announcements - Cash profit in the stock market - Economic development - Financial management - profit - stock - stock exchange - Stock market - stock market
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  • Summary of Investigating the reaction of the stock market to the cash dividend announcements in the Tehran Stock Exchange

    Academic Thesis for Master's Degree

    Business Management Department, Financial Orientation

    Abstract

    The main purpose of this research is to investigate the reaction of the stock market to the announcements of cash dividends in companies admitted to the Tehran Stock Exchange. The statistical population of this research includes all the companies admitted to the Tehran Stock Exchange during the years 1385 to 1389, and the sample size according to the screening method and after removing the outliers is equal to 125 companies (625 companies). In this research, which uses consolidated data as well as panel data with fixed and random effects, the results of the analysis of 625 companies during the years 1385 to 1389 using multivariable regression at the 95% confidence level show that there is a significant relationship between cash dividend announcements with cash returns, price returns, total returns and the difference between stock price returns and average returns. Also, these results indicate the absence of a significant relationship between stock liquidity and cash dividend announcements of companies.

    Key words: stock market reaction, cash dividend announcements, cash return, price return, total return

    First chapter:

    "General research"

    1-1 Introduction

    In financial research, the positive relationship between change in cash dividend And stock returns around cash dividend announcement days are well documented. (Aroni and Sawari[1], 1980; Askit and Mullins[2], 1986). Researchers believe that cash profit, like reported profit, provides information about the company's future cash flow. Cash dividend payments are regularly considered by investors as a source of information for predicting future cash flow (Benartzi et al. [3], 1997; Skinner [4], 2003). The change in cash profit helps the people who participate in the capital market to re-evaluate their predictions of the future cash flow and change the company's stock price accordingly.

    According to the above, this chapter has reviewed the generalities of the research. First, the main problem of the research is stated, and then the importance and necessity of the research is examined, and then the basic research objectives, research assumptions, research method, information gathering method, and the scope of the research are discussed, and at the end, the general structure of the research is stated. It is available to the public. It is also assumed that all information is freely and without restrictions available to all investors in the capital market. If such information exists, people who have access to this information can use it to predict stock prices and obtain abnormal returns. In fact, in order for a group to obtain stable additional returns, they must continuously have confidential information or have a special ability to obtain continuous abnormal returns based on public information, compared to other investors (Rai, Telangi, 2017: 506). Financial statements published by companies have information content. One of the characteristics of an efficient market in a strong form is that the stock price at any moment of time reflects the intrinsic value of the stock according to the available and relevant information in the market and there is no abnormal return in this market. Therefore, if this abnormal return can be reduced in the market, the efficiency of the market will increase. Reducing this additional yield is also possible only by identifying the factors related to its creation (Aksu, 2003). And since a part of this yield obtained by the investors includes cash profit, there is a need to investigate what reaction it will have on the market when the cash profit is announced, and this reaction is actually evaluated by the volume of transactions and the yield of the share. This research can be used for many investors of the Tehran Stock Exchange and take into account in their decisions because if the increase in dividends causes the market to respond appropriately, then it will be more appropriate to invest in companies that are facing an increase in dividends (Yahizadeh Far and Mirblouk, 1384: 104).

    Therefore, the main question of the current research is: "Is there a meaningful relationship between the reaction of the stock market and cash dividend announcements in the Tehran Stock Exchange?" Today, business units, as the main bases of countries' economies, have a large amount of economic resources, such as labor, raw materials, capital, etc. . . and on the other hand, due to the volume of production and sales, it plays an important role in the economic development and progress of countries. For this reason, discussions about the financial information of debt ratio, fixed assets turnover ratio, total assets turnover ratio, published EPS such as investment return ratio, net profit margin ratio are very effective in determining and identifying the optimal stocks, so accurate and timely financial information is very important in identifying the optimal stocks (Fallah Shams and Kosha, 2013). (Bahkish, 2008). The stock exchange is the main way to equip and optimally allocate capital. By improving efficiency, the stock exchange plays its role better in achieving the above goals. One of the characteristics of an efficient market is the transparency of information. By providing accurate and timely information to investors, it is possible for them to make correct decisions. Because when an investor decides to invest in shares, the first problem he faces is choosing the desired share to buy. Therefore, if relevant and timely information is available, investors will not get confused and can confidently make decisions using this information (Farbad, Bardbar and Mansouri, 2018). On the other hand, profit sharing can be discussed from two very important aspects. On the one hand, it is a factor affecting the investments facing the companies. Profit sharing reduces internal resources and increases the need for external financial resources. On the other hand, many of the company's shareholders want to distribute cash profits, therefore, with the aim of maximizing wealth, managers must always balance their various interests and profitable investment opportunities. Therefore, the profit distribution decisions taken by company managers are very sensitive and important. Comprehensive attention to the factors and restrictions affecting the dividend policy, in addition to maximizing the shareholders' wealth, provides the reasons for the company's preservation and survival in the field of competition and its increasing growth and development. Cash interest is of great importance as one of the ways of distributing cash flow among owners. Companies may distribute profits for several reasons. The messaging theories explain the distribution of cash interest. Based on these theories, the management increases cash dividends when it is sure of the future profitability of the company. Therefore, the distribution of cash dividends can contain a positive message of the company's future profitability (Kordestani, Nasiri and Rahimpour, 1389: 69-68).

    Therefore, considering the importance mentioned, dealing with cash dividend announcements and the market's reaction to it is one of the research priorities in this research. It is paid.

    1-4 research objectives

    A. The main objective:

    To examine the reaction of the stock market to the announcements of cash dividends in the Tehran Stock Exchange.

    B. Sub-objectives:

    Determining the relationship between stock liquidity and cash dividend announcements.

    2-Determining the relationship between stock price returns and cash dividend announcements.

    3-Determining the relationship between stock cash returns and cash dividend announcements.

    4-Determining the relationship between total stock returns and cash dividend announcements.

    5-Determining the relationship between the difference in stock price returns and average returns and Cash dividend announcements.

     

    C. Practical goals:

    More awareness of managers regarding the reaction of the stock market to cash dividend announcements.

    Providing solutions to make the policy and decision making of managers and decision makers more efficient.

    1-5 Research Hypotheses

    There is a significant relationship between stock liquidity and cash dividend announcements.

    2- Between stock price returns and dividend announcements There is a significant relationship between cash returns.

    3- There is a significant relationship between cash returns of stocks and cash dividend announcements.

  • Contents & References of Investigating the reaction of the stock market to the cash dividend announcements in the Tehran Stock Exchange

    List:

    Chapter One: General Research

    1-1 Introduction.. 2

    1-2 Statement of the Problem.. 2

    1-3 Importance and Necessity of Research Implementation. 3

    1-4 research objectives. 4

    1-5 research hypotheses. 5

    1-6 research method.. 5

    1-7 research field.. 5

    1-8 research structure.. 6

    Chapter two: theoretical foundations and literature

    2-1 introduction.. 8

    2-2 first part: financial-behavioral theoretical foundations (investors' reactions). 9

    2-2-1 History of financial-behavioral issues. 9

    2-2-2 behavioral assumptions of investors. 11

    2-2-3 psychological theories of investors. 13

    2-2-3-1 perspective theory. 13

    2-2-3-2 The theory of behaviors based on experience and error testing. 16

    2-2-3-3 theory of behavior of flowers in financial markets. 20

    2-2-3-4 view of disruptive traders in finance. 20

    2-2-4 Overreaction and underreaction. 20

    2-3, the second part: theoretical foundations of cash interest announcements. 23

    2-3-1 cash profit of shares. 23

    2-3-2 The concept of profit and its applications. 24

    2-3-3 accounting profit and how to calculate it. 25

    2-3-4 economic profit and how to calculate it. 26

    2-3-5 Comparison of economic profit and accounting profit. 28

    2-3-6 Uncertainty of cash flows and dividend policy. 30

    2-3-7 ratio of accumulated profit to total equity and profit sharing policy. 33

    2-3-8 Investment opportunities and dividend policy. 35

    2-3-9 Profitability and profit sharing. 37

    2-4, the third part - the background of the conducted research. 39

    2-4-1 Internal investigations:. 39

    2-4-2 Foreign research. 41

    Chapter three: research method

    3-1 introduction.. 47

    3-2 research method.. 47

    3-3 introduction of research models. 49

    3-4 research variables and operational definitions of variables. 49

    3-5 research methodology. 54

    6-3 methods of collecting information. 55

    3-7 Society and statistical sample. 55

    3-8 desired methods for analyzing information and testing hypotheses. 56

    3-8-1 Statistical analysis. 56

    3-8-2 Multivariate regression. 57

    3-8-3 coefficient of determination and corrected coefficient of determination. 58

    3-8-4 assumptions of linear regression. 58

    3-8-5 Test of independence of errors. 59

    3-8-6 Model suitability test. 59

    3-8-7 Collinearity test between independent variables. 60

    3-8-8 Test of significance of coefficients. 61

    3-8-9 Test of the normality of the dependent variable distribution. 61

    3-9 statistical analysis software. 61

    Chapter Four: Research Findings

    4-1 Introduction.. 63

    4-2 Description of the statistical sample. 64

    4-3 descriptive statistics of data. 65

    4-4 inferential statistics.. 66

    4-4-1 Determining the appropriate model to estimate the regression model. 66

    4-4-2 Classic assumption test of regression. 68

    4-4-2-1 The test of the normality of the distribution of the dependent variable. 68

    4-4-2-2 Test of independence of errors. 69

    4-4-2-3 Heterogeneity of variances. 70

    4-4-2-4 collinearity test of independent variables. 71

    4-5 Research hypothesis testing. 73

    4-5-1 Test of the first hypothesis. 73

    4-5-2 The test of the second hypothesis. 74

    4-5-3 Test of the third hypothesis. 76

    4-5-4 test of the fourth hypothesis. 77

    4-5-5 test of the fifth hypothesis. 79

    Chapter Five: Conclusions and Suggestions

    5-1 Introduction... 82

    5-2 Research Summary... 82

    5-3 Conclusion... 84

    5-3-1 Conclusion from the first hypothesis. 84

    5-3-2 Conclusion from the second hypothesis. 85

    5-3-3 Conclusion from the third hypothesis. 86

    5-3-4 Conclusion from the fourth hypothesis. 87

    5-3-5 Conclusion from the fifth hypothesis. 88

    4-5 Limitations of the research. 89

    5-5 suggestions for using the research results. 89

    5-6 recommendations for future research. 90

    Sources and sources.. 92

    Appendices and appendices.. 97

     

    Source:

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