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The impact of dividend announcements on share price and trading volume: Empirical evidence from the Gulf Cooperation Council (GCC) countries

Razaz Felimban (Department of Accounting and Finance, Business School, Middlesex University, London, UK)
Christos Floros (Department of Accounting and Finance, Technological Educational Institute of Crete, Heraklion, Greece) (School of Social Sciences, Hellenic Open University, Patras, Greece) (Department of Accounting and Finance, Business School, Middlesex University, London, UK)
Ann-Ngoc Nguyen (Department of Accounting and Finance, Business School, Middlesex University, London, UK)

Journal of Economic Studies

ISSN: 0144-3585

Article publication date: 14 May 2018

Abstract

Purpose

The purpose of this paper is to investigate the stock market response to dividend announcements in high growth emerging markets of Gulf countries.

Design/methodology/approach

The sample includes 1,092 dividend announcements from 299 listed firms over the period 2010-2015.

Findings

In the environment where there is an absence of capital gain and income tax, the authors find some evidence for the stock price reaction that partly supports the signaling hypothesis. The findings show that the Gulf Cooperation Council (GCC) market is inefficient because of the leakage information before the announcement in bad news, and the delay of share price adjustment in good news. In addition, the authors report significant trading volume (TV) reaction in all the three announcements clusters, where dividends increase, decrease, and are constant, lending support to the hypothesis that the dividend change announcements have an impact on the TV response due to different investors’ preferences.

Originality/value

This is the first empirical paper on market reaction in share price and TV around dividend announcement using data for the majority of GCC countries.

Keywords

Citation

Felimban, R., Floros, C. and Nguyen, A.-N. (2018), "The impact of dividend announcements on share price and trading volume: Empirical evidence from the Gulf Cooperation Council (GCC) countries", Journal of Economic Studies, Vol. 45 No. 2, pp. 210-230. https://doi.org/10.1108/JES-03-2017-0069

Publisher

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Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited