Dividend Announcements Impact on Share Price Volatility:... Selected Nifty Mid-Cap 150 Index Companies in India

Abstract

'ividend announcements are a key factor inÀuencing investor decision making in eTuity markets as they directly inÀuence investor wealth and reÀect a firm¶s financial performance. Most of the existing literature focuses on large-cap or developed markets, which does not give sufficient evidence on the relevance of dividend announcements on the share price volatility in the Indian mid-cap companies. This highlights a research gap in the Nifty Mid-Cap 150 Index where market dynamics and volatility patterns could provide different answers than large-cap segments. The core objective of the research is to examine the effect of announcements of dividends on stock price Àuctuations of identified companies that are registered in the 1ifty 0id-&ap 0 ,nde[ during the financial year 0-. 7he research employs secondary data gained from NSE and Money Control websites. The investigation of average abnormal returns (AARs) and cumulative average abnormal returns (CAARs) was calculated in a ten-day period of pre and post the announcement period, in order to capture the market reactions. The empirical outcomes show that the reaction of the market is substantial and positive on the dividend declaration day indicating that investors use dividend declaration as a high signal of corporate fiscal status and future outlook. $bnormal returns also stabilize in after announcement period and this shows that the market will adjust to the newly acquired information. Also, a paired t-test performed on different windows of events (-1, +1) to (-10, +10) to test the hypothesis proving that cumulative abnormal returns concerning dividend announcements are significant. 7he overall &$$5 is on an upward trend as event window extends but the average CAAR daily is declining marginally which is the concentrated effect with respect to the announcement phase and normalization of the market. 7hese findings support the signaling hypothesis and point towards the vital aspect of dividend announcements in determining shareholder expectations and the share price volatility in the Indian Nifty mid-cap 150 segment companies. The study provides practical implications for investors in emerging markets seeking to understand the stock price dynamics related to corporate dividend policy.