Dividend Declaration and its Impact on Market Performance of Selected commercial Banks Listed in Dhaka Stock Exchange

Dividend Declaration and its Impact on Market Performance of Selected commercial Banks Listed in Dhaka Stock Exchange 2013

Letter of Transmittal23/3,BirUttam A.N.M Nuruzzaman Sarak, Shyamoli, MohammadpurDhaka-1207, BangladeshMay 05, 2013

Abdullah Al MasumLecturerFaculty of BusinessASA University Bangladesh (ASAUB)

Subject: Thesis report on Dividend Declaration and its Impact on Market Performance of Selected Commercial Banks Listed in Dhaka Stock Exchange.

Dear Sir,

Enclosed is a Thesis report on Dividend Declaration and its Impact on Market Performance of Selected Commercial Banks Listed in Dhaka Stock Exchange. This Thesis report contains Introduction, Research Methodology, Results and Discussions, related to this Thesis report and Findings and Conclusion. It shows me that how the Dividend Policy impact on the market price of the share of different Commercial bank. It will help me to develop my knowledge about market behavior and activity on such condition. This Thesis report was given by you (Thesis supervisor Abdullah Al Masum) to improve my knowledge on Market condition and the impact of the divined policy. I completed this Thesis report on scheduled time and met all the given requirements mentioned to prepare this Thesis report.

As per my given requirement, this Thesis report includes title fly, title page, letter of transmittal, table of contents and the other parts of this Thesis report. In the other parts of this Thesis report, this Thesis report has been analyzed and Findings have been given. This Thesis report will help us to know the impact of the dividend declaration strategy and the market performance of the different commercial bank. If you have any questions and/or comments regarding the interpretation of this Thesis report, please enquire me. Thank you for giving me such an interesting work to do and I am delighted to prepare this Thesis report under your guidance.

(Signature)Sincerely,Md. Shahnewas RokyID: 12-214-0071Program: M.B.ABatch:16thMajor in FinanceASAUBEnclosure: Final Thesis report.

Declaration

I do solemnly declare that the work presented in this Report on Dividend Declaration and its Impact on Market Performance of Selected Commercial Banks Listed in Dhaka Stock Exchange is an original work done by me under the supervision of Abdullah Al Masum, Lecturer, Department of Business Administration, ASA University Bangladesh.

No part of this report has been previously submitted to any other University/College/ Institutions/Organization for any academic certificate/ degree/ diploma/ qualification.

The work I have presented does not breach any existing copyright and no portion of report is copied from any work done earlier for a degree or otherwise.

I further undertake to indemnify the Department against any loss or damage arising from breach of forgoing obligation, if any.

(Signature)Sincerely,Md. Shahnewas RokyID: 12-2-14-0071Program: M.B.ABatch:16thMajor in FinanceASAUBEnclosure: Final Thesis report.

Certificate from Guide

The Research Report entitled Dividend Declaration and its Impact on Market Performance of Selected Commercial Banks Listed in Dhaka Stock Exchange has been submitted to the Office of Placement & Alumni, in partial fulfillment of the requirements for the degree of Masters of Business Administration, Major in Finance, Faculty of Business Administration on 05 May, 2013 by Md. Shahnewas Roky, Id # 12-2-14-0071. The report has been accepted and may be presented to the Internship Defense Committee for evaluation.(Any opinions, suggestions made in this report are entirely that of the author of the report. The University does not condone nor reject any of these opinions or suggestions).

(Signature)Sincerely,Abdullah Al MasumLecturerFaculty of BusinessASA University Bangladesh (ASAUB)

Table of ContentsContentsPage No.

Title FlyI

Title PageII

Letter of TransmittalIII

DeclarationIV

Certificate from GuideV

Table of ContentsVI-VII

AcknowledgmentVIII

Abstract IX

CHAPTER 1.0:INTRODUCTION1-7

1.1 Origin 2

1.2 Background 2-3

1.3 Scope3

1.4 Objectives3-4

1.5 Conceptual Frame Work4

1.6 List of Key Variables4

1.7 Operational Definitions5-6

1.8 Limitations of the study7

CHAPTER 2.0:LITERATURE REVIEW8-14

2.1 Literature Review8-11

2.2 Dividend11

2.3 Pay or Plough back11

2.4 Dividend policy12

2.5 Dividend payout12

2.6 Dividend payout ratio12

2.7 Ex-dividend date12

2.8 Dividend notification13

2.9 Dividend rate13

2.10 Preferred stock13

2.11 Preference shares13-14

2.12 Stock dividend14

2.13 Shareholder14

2.14 Stockholder14

CHAPTER 3.0:METHODOLOGY 15-

3.1 Study Design16

3.2 Study Period16

3.3 Study Population16

3.4 Sample Size Determination16-17

3.5 Sampling technique17

3.6 Data Collection Technique17

3.7 Data Processing and Analysis17

3.8 Ethical Considerations17

CHAPTER 4.0:OVER VIEW OF THE BANK18-50

4.1 Overview of Banking Industry in Bangladesh19

4.2 Overview of the Selected banks20-50

CHAPTER 5.0:FINDING AND DISCUSSION51-58

5.1 Pearson Correlation52-55

5.2 Linier Regression 56-57

CHAPTER 6.0:CONCLUSION58-59

6.1 Conclusion59

Reference60

Appendix 61-63

List of TablesCHAPTER 5.0:5.1 Pearson Correlation52

5.2 Linier Regression 56

AcknowledgmentEducation involves not only reading books and doing exercise but also acquiring knowledge through doing something practically. This report has designed only for considering that objective.

During the period of preparing the Thesis report on The Dividend Declaration and its Impact on Market Performance of Selected Commercial Banks Listed in Dhaka Stock Exchange, I had gained altruistic assistance from a number of persons including my honorable and respectable Thesis supervisor Abdullah Al Masum, Lecturer, Faculty of Business, ASAUB.

Last of all, I would like to thanks Almighty Allah, my parents, my friends and teachers, who were been always helpful with me by providing useful information. I also thank my friends for their encouragement and help. I deeply wish to pay highest tribute to my parents for their love, support, encouragement and advice. To them I dedicate this study.

AbstractDividend policy is a widely researched topic in the field of investments and finance but still it remains a mystery that whether Dividend Policy affects the Stock Prices or not. The results of researches conducted in various stock markets are different. There are many internal and external factors, which simultaneously affect stock prices and it is almost impossible to segregate the effect of each so the variations remain. This paper empirically estimates excess stock market returns for ten out of the thirty Dhaka Stock Exchange listed private commercial banks in Bangladesh during the period of December 2007 to December 2011. Attempts are made to examine what kind of relationship exists between dividend policy and stock market returns of private commercial banks in Bangladesh, and to what degree the returns on stocks can be explained by their respective dividend policy for the same period of time. Various theories related to dividend policy are tested in various parts of the world with different results and findings. Various other articles are reviewed, written in Bangladesh and abroad to see the significance of dividend policy on the stock prices and to compare the results of this research with those conducted earlier. Sample size is large i.e. almost one third of the total listed companies of Dhaka Stock Exchange so the results are reliable and valid. In the last decade stock market of Bangladesh went through many changes and huge ups and downs were seen. The economic crisis of the world in year 2010-11 also affected the market adversely. In the last couple of years the markets have again try to shown steady upward trend. All these fluctuations in the stock prices due to external factors, including international factors, make it difficult to check the impact of dividend policy. Here it is also pertinent to mention that stock markets of Bangladesh are mainly speculative and capital gains are mostly sought by investors, particularly individual investors. Institutions and long term investors give due consideration to dividends and dividend polices of companies, which is a large and significant portion of the total investment in the stock markets. Panel data approach is used to explain the relationship between dividends and stock prices after controlling the variables like Earnings per Share, Return on Equity, Dividend Per Share, Retained Ratio have positive relation with Stock Prices and significantly explain the variations in the market prices of shares, while the Return on Assets, Dividend Yield and Retained Earnings Per Share has negative, insignificant relation with stock prices. Overall results of this study indicate that Dividend Policy has significant positive effect on Stock Prices.

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