Price Formation Around Cum Date Dividend Announcement: Empirical Evidence in Indonesian Stock Exchange

Abstract

This research aim is to prove there a change in abnormal returns around the announcement date of the cum date dividend date and price changes around the announcement date. The population studied is the company announced a dividend for the period 2007-2012, consists of 15 companies that successive 3-year reported operating income, cash dividends during the 11 days of observation. Testing of the event study on the information content of the cum date dividend announcement is found that it contains no significant information on cum date dividend announcement, and found no significant negative information content one day after the cum date dividend announcement. Results of this study still found the significant abnormal returns around the dividend announcement. Regression testing ask price, bid price, and the days before and after the dividend announcement to the stock price was found that the price formation is not influenced by the dividend announcement, but they are influenced by the ask and the bid prices, which implies there is an effort of investors to maximize capital gains by making the selling and purchasing of certain stocks.