Impact of Quarterly Earnings and Dividend Announcements on Stock Prices in India

Abstract

This study tries to look into the impact of quarterly earnings and dividends announcements on the stock prices in India and the abnormal returns before and after the announcements. The sample consists of 59 quarterly earnings and dividends announcements from April 2004 to March 2008, of companies belonging to the Nifty Fifty. We use the event study methodology to find out the market reaction of the announcements before and after the event. There is an indication of abnormal and cumulative abnormal returns around certain announcements which show that markets are inefficient in the semi-strong form but the other cases of joint announcements indicate that markets are efficient in the semi-strong form because we can earn only normal returns as per the market model. The study is not able to separate the effect of dividends and earnings announcements on the stock prices. The study contributes to the ongoing debate on efficient market hypothesis and specifically to the semi strong form of efficiency.