Share Price Reaction on Dividend Surprises: Evidence from Russian Market».

The main question of my research was to estimate how stock price reacts to dividend surprise. The price could either go up or down, or even stay flat on dividend announcement. The most interesting is that all these options have theoretical background. Researchers still want to find the exact determinants of firms’ dividend policy and these is no common solution. In my work, I decided to integrate new way to assess dividend impact on the share price and compare it with previous findings. Currently there are three research papers devoted to dividend surprise announcement on Russian market.. There was found negative correlation of the share price with unexpected dividend increase. I wanted to find positive correlation, as Russian economic is a commodity driven. I introduced two ways for more accurate measurement of dividend surprise. First, I decided to calculate dividend surprise as a deviation from expected dividend estimated by investment banking analysts. Estimates were obtained from consensus collected by Bloomberg. Second, I decided to use panel structure regression to control for company and industry specific characteristics. Because there are always omitted variables, constant over time, which influence company’s dividend policy. Conducting research overall Russian market I concluded that fixed effects estimator helps better control industry and company specific characteristics. That was verified by F-tests and Breusch Pagan tests. Moreover, it was found positive correlation between progressive dividend surprise and the stock price. We can say that our assumptions were generally accepted. We partially agreed with previous findings on Russian market and concluded that panel structure helps better estimate regressors. Moreover, we introduced progressive dividend surprise, which is better than naïve because it accounts for company dividend policy directives.