Stock Price Reactions to the Dividend Announcement in the Emerging Market: Case in the Colombo Stock Exchange Sri Lanka

Abstract

Stock price reaction to the dividend announcement is a topic that discuses in number of empirical research in the developed and emerging stock markets over the last several decades.  This study examined the stock price reactions to the dividend announcement in the Colombo Stock Exchange (CSE), Sri Lanka for the period of 2008 to 2012.The main objective of this paper to examine the information content of dividend announcement and provide the test of the semi-strong form market efficiency of CSE. Standard event study methodology also applied in this study to analysis the stock price reaction for dividend announcement. The study reveals that dividend announcement has information contain and market response it positively on the event day. However it is also reveals that market response before and after the announcement which is means that CSE not confirm the semi-strong form of market efficiency.

Keywords: dividend announcement, emerging market, Colombo Stock Exchange