The effect of dividend policy (announcement) on share prices Essay

The effect of dividend policy (announcement) on share prices - Essay Example However, to what extent announcement of dividend policy can influence share prices are required some empirical testing. This paper attempts to examine whether announcement of companies’ dividend policy can significantly influence share prices in UK stock market. For the purpose of this study observations on dividend policy announcements of a group of FTSE 100 firms have been taken into account for a period of 2000-2009 and an event study has been conducted to test the level of significance of the effect of dividend announcements on the selected firms’ share prices. On the basis of the findings, the study has come to a conclusion that in UK, the event of announcement on dividend policy has potential to significantly affect share prices. To obtain desired level of outcome, it is very necessary to apply appropriate method while conducting a research. The reliability and validity of the research outcomes also to a large extent depend on the method that the research has followed. After choosing a particular subject, the must vital thing is to build an appropriate research design which will be followed throughout the whole research process. Research method varies with the type, aims and objectives of the research. Before deciding on any particular research method, it is necessary to evaluate the pros and cons of this method on the basis of research outcomes of the past studies. Research techniques are basically of two types – quantitative and qualitative. However, in some studies researchers also combine these two processes to form a ‘mixed-method’ approach. Qualitative research technique is used when the researcher’s inquiry is based on the participant’s opinion about a particular situation. In that method, the researcher wants to gather subjective data, therefore his personal knowledge and research methodology influences the research to some