How Do US Stocks React to Dividend Announcements?

This event study investigates stock market reactions to dividend announcements in the U.S. by analyzing stock’s abnormal returns within several different short to mid-term event windows. The study uses panel data regression analysis and fixed-effects event study method to reach its findings. Chosen data set consists of 959 dividend announcements of 219 listed companies among US stock exchanges; Nasdaq Stock Exchange, NYSE, Standard & Poor’s, data set belongs to companies which are from 5 different industries as; technology, food and beverage, tourism and leisure, industrials, the financial sector. The study explains how the firm size, firm age, and earnings surprise ratios of these companies are related to the stocks’ reactions to dividend announcements. The study works on defining which event windows have the most significant abnormal returns to investors around the dividend announcement dates. The study also investigates the reactions of stock prices with testing how the ESR affects stock prices, concludes with a comparison of whether the reactions of different industries’ stocks are differing from each other or not. Keywords: dividend announcements, corporate events, earnings surprise ratio, event windows, CAR.