An Analysis of the Informational Content of Dividend Change Payments at Amman Stock Exchange

Abstract

This study investigates the market reaction to dividend change announcements for the period 1996 to 2002 at Amman Stock Exchange. Event study methodology is applied to examine the significance of mean abnormal return on and around the announcement date, thin, trading model of Scholes and Williams is applied and parametric and non parametric tests are used. Also, this study applies ZD test that corrects for the misspecifications related to the market model. The results show that the market reacts negatively to dividend change announcements and no pre-event information leakage for the samples studied. The conclusion doesn’t appear to support signalling hypothesis and suggests dividends in Jordan are a residual payment that is consistent with Mollah (2001).