Ibadan Journal of the Social Sciences
Volume 4, No. 1, 2006
Pages 46-59

DOI: 10.36108/ijss/6002.40.0140

Market Reactions to Dividend Initiations and Omissions on the Nigerian Stock Market

Olatundun Janet Adelegan

Department of Economics, University of Ibadan, Nigeria


This study investigates price reactions to initiations and omissions of dividends using daily stock prices between 1990 and 1999, There are 127 cases of initiations and 146 cases of omissions of dividends. The study used the modified market model to analyse the short-run and the long-run market reactions to the events. The result shows that cumulative excess returns for samples of dividend initiations and omissions are significant from the day of announcements and omissions of dividends respectively until 30 days after the announcement. It points to the fact that dividend policy matters and share prices do react to dividend initiations and omissions in Nigeria. Consistent with prior literature, the study found that the magnitude of short-run price reactions to omissions is greater than reactions to initiations.
Keywords: Dividend policy, initiation, omission, market reaction and excess returns.


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