| Summary: | This study aims to empirically investigate the existence of intra-industry
information transfer on nonreporter firms as related to cash dividend change
announcement by reporter firm. In addition, this study also empirically investigate
variables that influence the magnitude and the direction of intra-industry
information transfer on nonreporter firm. Samples (observations) that used on this
study include reporter and nonreporter firm that respectively 200 and 541
observations on cash dividend increased announcement and 93 and 199
observations on cash dividend decreased announcement. The period that used on
this study covers 2001-2012. As related to the statistic method that used to test the
hypothesis, t-test (one sample t-test) and multiple regression analysis were used
on this study.
The result of the hypothesis testing on this research indicate that there was a
significantly positive market reaction on reporter�s firm stock in increased cash
dividend announcements whereas the hypothesis on decreased cash dividend
cases was rejected because the result indicate that there was not exist a
significantly negative reaction. In addition, as related to intra-industry
information transfer (proxied by the significance of cumulative abnormal return)
testing, this study found that there was exist a contagion effect (direct reaction) in
which the nonreporter�s firm shares obtain a significantly positive cumulative
abnormal return on reporter�s cash dividend increased announcement and obtain
a significantly negative cumulative abnormal return on reporter�s cash dividend
decreased announcement. As related to the testing about variables that influence
the magnitude of intra-industry information transfer, it has been founded that on
the cash dividend increased cases, variables that has statistically significant were
reporter�s firm dividend surprise variable (positive), nonreporter�s firm cash
dividend change on the last year (negative), and return correlation between
reporter and nonreporter firm (positive), whereas on the cash dividend decreased
cases, it has been founded that only reporter�s firm dividend surprise variable
(positive) and size of reporter�s firm were statistically significant. As related to
the testing of intra-industry information transfer direction, it has been found that
competitive effect (adverse reaction) were exist on the cases of cash dividend
increased announcement, whereas on the cases of cash dividend decreased
announcement, this study found the existence of contagion effect (direct reaction).
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