| Summary: | Increasing dividend announcement indicates a positive signal to investors
and company management about the future profit growth good prospects in the
coming years. Companies that are able to distribute higher dividends would have
increase their share price as investors considered the companies to possess excess
free cash flow, which is the cash remaining after deducting the investment needs
for the following years.
Ex-dividend date is a condition for the loss of the right to receive
dividends on the shares owned by investors when buying shares at the ex-dividend
date or after the ex-dividend date which can lead to decrease investor�s motivation
to buy the stock on the ex-dividend date thus the tendency for ex-dividend date is
decreasing stock price.
This research aims to test whether the market reaction towards dividend a
announcement in the form of positive abnormal returns and trading activity
increase towards dividend per share increase, as well as the occurrence of
abnormal negative returns and a decrease in trading activity in the presence of exdividend
date. Market model is used to test the abnormal return while trading
volume activity (TVA) is applied to test stock trading used activity.
The results shows that there are positive abnormal return during the
dividend increase per share in cash announcement, negative abnormal return at the
ex-dividend date and the day after the ex-dividend date. While based on TVA
calculation, there is no significant difference found in trading activity both before
and after the announcement of the dividend increase per share and ex-dividend
date.
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