This study attempts to investigate the stock price reaction to dividend announcements using data of Vietnamese listed firms on Hochiminh Stock Exchange (HOSE). Standard event study methodology has been employed on a sample of 198 cash dividend announcements made in 2011. | 74 Nguyen Xuan Truong et al. / Journal of Economic Development 24(2) 74-89 Stock price reaction to cash dividend announcements in Vietnam NGUYEN XUAN TRUONG Hanoi University – truongnx@ DAO MAI HUONG Hanoi University – NGUYEN THI VAN ANH Hanoi University – ntva1279@ ARTICLE INFO ABSTRACT Article history: This study attempts to investigate the stock price reaction to dividend announcements using data of Vietnamese listed firms on Hochiminh Stock Exchange (HOSE). Standard event study methodology has been employed on a sample of 198 cash dividend announcements made in 2011. The results show that stock prices react significantly and positively to the announcements of cash dividends, including both dividend increasing and dividend decreasing events. It is also plausible that cumulative abnormal returns exhibit an increasing trend before announcement yet a decreasing trend after announcement dates. More specifically, we find positively significant cumulative abnormal returns of around on announcement dates; other larger windows also demonstrate positive abnormal returns of around . In addition, cash dividends have different effects on share prices of firms from different industries. These results support the signaling hypothesis and are also consistent with prior findings of empirical research done on more developed markets, . the US and the UK. Received: Sep. 17, 2015 Received in revised form: Sep. 16, 2016 Accepted: Mar. 31, 2017 Keywords: Dividend announcement Price reaction Event study Nguyen Xuan Truong et al. / Journal of Economic Development 24(2) 74-89 75 1. Introduction Numerous studies have been conducted in the area of market reaction to dividend announcements in many developed markets such as the US, the UK, and Australia. Researchers found evidence to support the hypothesis that dividend announcement s do convey information on the future prospects of firms (., Miller & .
