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Dividend Policy and Share Price: Evidence from Hong Kong Listed Company - Essay Example

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Dividend Policy and Share Price: Evidence from Hong Kong Listed Company

Conclusion: Dividends influence stock prices of listed firms on the Hong Kong Stock Exchange thus supporting the dividend relevance theories. Contribution: This paper contributes to the literature on dividend puzzle by providing a perspective from an emerging market on the debate and supporting the relevance of dividends. Recommendations: The study recommends use of larger sample size, longer period, panel data and panel analysis methodologies in future. Introduction This study seeks to examine the relationship between market ratio, dividend policy, earnings and share prices of the Listed Company in Hong Kong Stock Exchange. Since there are inconsistencies in the results of numerous studies on the relationship between dividend policy and stock prices with some supporting dividend irrelevance theories while other supporting dividend relevance theories, there is still need to study more on this especially from the perspective of an emerging market. This study focuses on the listed firms on Hong Kong Stock market. The stock market in Hong Kong is blooming over the past few years with over 1,300 companies currently listed in the Hong Kong stock market. Being an emerging market therefore, this sample will be useful in providing the link between dividend policy and stock prices. The study therefore selects 35 listed companies with five year financial data (total 185 data). This research study is based on 2 journal articles, “The investigation of relation between Market Ratios and Market price per share of accept companies in Tehran Stock Exchange” (Saeidi and Khandoozi, 2011) and “Dividend policy, trading characteristics and share prices: Empirical Evidence from Egyptian Firms” (Omran and Pointon, 2004). Literature Review Omran and Pointon (2004) used data from 94 firms up to 1999 to study the relationship between dividend policy, trading characteristics, and share prices in Egyptian firms. The results showed that retentions were more significant determinants of prices of shares actively traded on the Egyptian stock market than dividends. This study therefore revealed that share prices are influenced by dividend policy, though not as much as retention does. Rashid and Rahman (2008) examined the relationship between dividend policy and stock price volatility in Bangladesh. The study used the cross-sectional regression analysis and controlled for earning volatility, payout ratio, debt, firm size and growth in assets. The study found a positive, but non-significant relationship between stock price volatility and dividend yield. The authors noted that the share price reaction to the earnings announcement was not similar to that of other developed countries and therefore managers may not use the dividend policy to influence their stock’s risk. The authors also noted that because of the inefficient capital market in Bangladesh, the influence of stock price risk through dividend may be ambiguous. Fracassi (2008) examined the stock price sensitivity to dividend changes. The study found that dividend signaling, the free-cash-flow, the maturity and the catering hypotheses all predicted an average positive (negative) reaction to announcement of a dividend increase (decrease). The results show ...Show more

Summary

Study on Relationship between Market Ratio, Dividend Policy, Earnings and Share Price: Evidence from Hong Kong Listed Company Abstract Purpose: The main purpose of this study is the find out the relationship between Market Ratio, dividend policy, earnings and share prices of the Listed Company in Hong Kong Share Research Methodology: Analyze the data and find out the relationship between share price, dividend policy and earning by using multiple regression analysis method through excel…
Author : russelstan
Dividend Policy and Share Price: Evidence from Hong Kong Listed Company essay example
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