Abstract:

The paper investigates how stock price react to dividends announcement the Ghana Stock Exchange (GSE) from 2015 - 2017. It focused on examining the reaction of share prices to dividend announcement using a sample of six banks (financial institution enlisted on the GSE from 2015 – June 2017. The methodology and the market model are used in estimating the abnormal and the cumulative abnormal return for -10 days before and +10 days after the announcement date.

The overall findings of the study showed that share prices react to dividend announcement though not instantly. It is observed that the average abnormal returns and the cumulative average abnormal returns for all the days before, on and after the day of dividend announcement are statistically significant and positive. It is expected that this study would help most investors to know the level of efficiency on the Ghana Stock Exchange. It suggests that in addition to the recent electronic trading development on the GSE, there is the need to further improve the quality, quantity and reliability of information on listed firms disclosed to the public.

Keywords: Dividend, Dividend Announcement, Efficient Market Hypothesis, Market Efficiency, Stock Prices, Stock Returns.

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