The Effect of the Announcement of Dividends on Share Prices: The Case Study of Saudi Stock Exchange (TASI)

Abstract

The main goal of the research is to study the effect of earnings announcement on share prices in Saudi Exchange Market (TASI) during the period (2013-2017) using daily data. The sample of the study consists of 30 companies which are chosen from 11 different sectors. Market models and capital market pricing model was applied. The result show that some of the firms have a positive relationship between the announcement and share prices. However, for some firms there was a negative relationship and others did not have any effect. Thus, we conclude that the increase in dividend announcement does affect the stock prices but investors cannot capitalize on the announcement to make abnormal returns as less than half of the announcements is having a significant abnormal returns.