Research Papers


  • Dividend Announcements, Firm Size and Dividend Growth in the Sri Lankan Stock Market

    D. B. P.H. Dissa Dandara
    Lalith P. Samarakoon
    AbstractThis paper investigates the informational content of dividend announcements and analyzes the impact of dividend announcements by firm size and dividend growth using a sample from the emerging market of Sri Lanka. Consistent with prior evidence from developed stock markets, we find that dividends have a significant information content in the Sri Lankan stock market. On average, market reacts positively to dividend announcements. The information content is stronger for the smaller firms and for firms announcing high dividend growth. We also find a considerable anticipatory effect for smaller firms, the largest firms and for firms announcing lowest dividend growth. The market takes considerable time to fully incorporate information contained in dividend announcements by the smallest firms, the largest firms, and by firms announcing the highest dividend growth. Overall, the results are inconsistent with an informationally efficient stock market. Published onSri Lankan Journal of Management, Vol. 7, Nos. 3 & 4, July - December, 2002KeywordsStock Market, Dividend Announcements

  • Why do companies pay dividends? : A comment

    Dewasiri .N. J.
    Weerakoon Banda Y.K.
    AbstractThis study reviews one of the unresolved research puzzles in corporate finance; why do companies pay dividends? In this context, a qualitative study dealing with content analysis is carried out based on the theoretical and empirical research. After critically reviewing 407 research articles in dividend policy, 50 empirical studies were taken as the sample based on the relevancy to the research puzzle. The content analysis has provided some significant insights and stylized facts with regard to the corporate dividend policy. However the previous research studies were fundamentally flawed in their design based on quantitative approaches in order to elucidate a behavioural explanation. As a result, most of the study findings cannot be relied upon to see consistency with the theories in question. Despite years of theoretical and empirical evidences, the findings show that the dividend puzzle is still remaining as unresolved research phenomenon in corporate finance due to lack of unanimity among the researchers over the explanations. This study provides the reader an all-embracing understanding on the theories and empirical explanations over the dividend puzzle. It is imperative for the researchers to focus on all empirical and theoretical explanations in a single study and test them simultaneously in a triangular approach in order to have a single consensus over this puzzle. Thus, developing a new paradigm or models to deal with the dividend puzzle is suggested, until then the deduction of various theories in different studies are inconclusive and inconsistent. Published onCorporate Ownership & Control, Volume 13, Issue 2, Winter 2016, Continued – 2KeywordsCorporate Dividend Policy, Dividend Puzzle, Triangular Approach

  • Dividend Policy and Stock Price Volatility: An Error Corrected Approach

    N.J. Dewasiri
    Y.K. Weerakoon Banda
    AbstractThe purpose of this study is to investigate the relationship between dividend policy and stock price volatility (SV) in the Sri Lankan context. Based on the Hausman test results, the cross-section random effect model (CSREM) is performed in order to test the hypotheses. The Granger causality (GC) test is employed in order to test the short-term relation between dependent and explanatory variables. The CSREM test revealed that there is a significant negative impact from dividend payout, a significant positive impact from company size and no evidence of significant impact from dividend yield (DY) on SV. Furthermore, GC tests revealed that there is no short-term impact from dividend payout on SV and it showed a feedback exists between company size and stock price volatility. It is also reported that a unidirectional causality exists from DY to SV in any lag level. The management could use dividend policy as a mechanism to control stock price volatility. They could reduce the SV by increasing their dividend payout and it is possible to increase the volatility by enhancing the DY or firms size in the short run. This study is the first to accentuate that DY has a significant impact on SV in the short run and the first to discuss the same phenomenon in the Sri Lankan context, as per the best of the authors’ knowledge. Published onAsia-Pacific Journal of Management Research and Innovation, 11(3) 165–171, © 2015 Asia-Pacific , Institute of Management , SAGE Publications,, DOI: 10.1177/2319510X15588387 random effect model; dividend policy; Granger causality test; stock price volatility

  • Stocks, bills and inflation in Sri Lanka

    Lalith P. Samarakoon AbstractOne of the central issues in finance is the estimation of expected returns on assets. Asset pricing theories such as the Capital Asset Pricing Model (CAPM) of Sharpe (1964), Lintner (1965) and Black (1972), and the Arbitrage Pricing Theory (APT) of Ross (1976) are concerned with the determination of equilibrium expected returns on assets. The implementation of these asset pricing theories requires estimation of a number of inputs. Main such inputs include the risk-free rate of interest, the market risk premium or the price of risk, and beta coefficients or the amounts of systematic risk. In practice, estimates of these parameters are carried out on the basis of historical data with are then used, either with or without adjustments, as surrogates for the inputs required by asset pricing models. Published onVidyodaya Journal of Social Science, Vol:8, No:1 & 2, p.157 – 183, 1997

Last Modified: September 7, 2012