Dividend announcements: an empirical study of security prices reaction in the KLSE main board

Abstract

This study is to examine the security prices reaction to dividend announcements from the period of January 2004 until December 2008 in Kuala Lumpur Stock Exchange (KLSE) Main Board. Basically, the dividend announcements are categorised as Dividend Increases (DI), Dividend Decreases (DD) and Dividend Unchanged (DUN). The results show that there are no significant abnormal returns during announcement day regardless types of dividends. However, there are significant reactions after the announcement day. These delayed reactions indicate that KLSE Main Board is not “informationally efficient”. The market inefficiency also supported by some evidences of information leakage prior to announcement day. Besides, the direction of reaction is upward trend regardless type of information conveyed to the market.