| Summary: | 碩士 === 國立臺灣科技大學 === 財務金融研究所 === 98 === The primary goal of this study is to investigate how investor sentiment affects a firm’s stock prices after its dividend announcements. To this end, we first study the effect of a firm’s dividend announcements on its stock prices and then see whether investor sentiment plays a role in explaining this effect. Many researchers have found the signaling effect of dividend announcements. For example, McNichols and David (1990) argue that the positive abnormal returns of the dividend announcement event are due to the fact that investors expect the firm’s will increase in the future. The sample period of this study covers from 2001 to 2009, and the sample includes all Taiwanese firms with dividend announcements. We use the event study methodology to conduct our analysis, and employ the market model to estimate abnormal returns after dividend announcements for each sample firm.
Because it is difficult to collect the data on the direct indices of investor sentiment, we follow Baker and Wurgler (2006) and other studies to calculate the indirect indices of investor sentiment. The indirect indices are classified into two categories: one is the firm-specific index and the other one is the market-wide index. Then we run the OLS regression to see how investor sentiment affects a firm’s stock prices after its dividend announcements.
Some important empirical results are noted as follows. First, we find that there are positive cumulative abnormal returns after announcement day 0 to day 2. Second, there is a negative relationship between investor sentiment and positive cumulative abnormal returns, meaning that low market-wide sentiment leads to high cumulative abnormal returns. Third, the firm-specific index has no impacts on cumulative abnormal returns. Fourth, we find that cumulative abnormal returns are significantly negatively affected by market-wide sentiment for small, young, unprofitable and high-volatility stocks.
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