Stock Dividend Ex-Day Abnormal Return

Abstract

This study examines the impact of the ex-day of stock dividend on stock return and volume on Borsa Istanbul stock exchange. The data covers 1,220 stock dividends associated with 305 companies over the period 1997-2018. A positive abnormal return and volume is seen around the ex-day of stock dividend. The cumulative average excess return over market return starts to significantly rise ten days before ex-day and reaches its highest level on the ex-day before falling back in the days following. Our findings show that abnormal return around ex-day is strongly associated with stock dividend pay-out ratio, asset size and a company’s market value. The share of listed companies with higher stock dividend pay-out ratio or lower asset size or lower market capitalization, can generate respectively 5.97%, 6.08% and 5.88% abnormal return over market index return.