The Effect of Dividend Policy on Share Prices - Essay Example

To obtain the desired level of outcome, it is very necessary to apply appropriate methods while conducting research. The reliability and validity of the research outcomes also to a large extent depend on the method that the research has followed. After choosing a particular subject, the most vital thing is to build an appropriate research design that will be followed throughout the whole research process. The research method varies with the type, aims, and objectives of the research. Before deciding on any particular research method, it is necessary to evaluate the pros and cons of this method on the basis of research outcomes of the past studies.

Research Technique:

Research techniques are basically of two types – quantitative and qualitative. However, in some studies, researchers also combine these two processes to form a ‘mixed-method approach. The qualitative research technique is used when the researcher’s inquiry is based on the participant’s opinion about a particular situation. In that method, the researcher wants to gather subjective data, therefore his personal knowledge and research methodology influence the research to some degree (Herndl & Nahrwold, 2000, 265-270). One of the most important outcomes of this method is that it highlights the researcher’s views during the research process. The quantitative research method, on the other hand, is used to describe variables and examine relationships among those variables (Creswell, 2001, 10-15). According to Creswell (2001), this research is the most used method of scientific investigation and can determine cause-and-effect relationships between variables.  It is also very useful in testing a theory by testing the validity and reliability of the specific relationship.

Given the nature of these two types of research techniques, the quantitative research method, therefore, seems to be appropriate for any study in the field of finance. Quantitative methods are of different study. a number of statistical tools are there that can be used for conducting research in the area of finance. Among those various tools, the most appropriate one for this study is the method of an event study. It is a very complicated process, but it has immense potential to provide accurate outcomes.

The method of event study was first forwarded by Fama et al. in their article in 1969 (Fama et al., 1969). Thereafter a number of researches in different fields, particularly in the area of finance have employed this method. Within the area of finance, researchers on the stock market have used this method the most frequently.   There also exists a number of articles that elaborately discuss this method so that researches in the stock market become much easier to conduct using this statistical process of investigation (Brown and Warner, 1980; MacKinlay, 1997; Lo and MackKinlay, 1997; Binder, 1989).