The Impact of Dividend Policy on Stock Price of Commercial Banks Listed in Dhaka Stock Exchange

A few investigations have been directed on Dividend Policy by various researchers in various time frames. The connection of value instability and dividend yield is very noteworthy as contrast with different factors. (Asghar, Shah, Hamid and Suleman, 2011) Dividend strategy has positive impact on stock costs (Murhadi, 2008). Dividend paying banks have a more fluid market for their stock and measures of a stock's liquidity are decidedly connected to its likelihood of being a dividend payer (Igan, Paula & Pinheiro, 2010). The total overabundance returns (CERs) for dividend paying banks are sure and huge for 30 days from the day of the declaration, while the CERs for dividend overlooking banks for a similar period are huge and negative (Adelegan, 2009). Bigger banks, those with higher benefit, and firms with low development openings have a more noteworthy inclination to pay dividends.

Gittman (2004, pp. 312) divided stock into two types, such as common stock and preferred stock. He additionally demonstrated that dividends are the result of venture. Thus, basic stocks are a possession guarantee against principally genuine or gainful resource (Higgins, 1995), yet he additionally said that if the organization succeeds, investors are the central recipients, on the off chance that it wavers, they are the main failures. Smith (1988) exhibited that stocks are a standout amongst the most famous types of venture. Individuals purchase stocks for different reasons: some are occupied with the long haul development of their venture by purchasing low valued supply of another organization in the expectation of considerably development of offer cost throughout the following couple of years. Another reason he proposed that in a settled firm investors expect the stock development will be steady finished the long run. (Smith, 1988)

There has been a noteworthy decrease in the normal dividend payout proportions throughout the years. (Fatemi and Bildik, 2012) Securities exchange prove demonstrates that energy benefits are bring down among dividend paying firms than their non-paying partners because of contrasts in failures' dividends (Asem and Ebenezer, 2009). At the point when the corporate money related arrangement suggests now some default chance, we demonstrate that the estimation of the bank is a piecewise diminishing elements of the dividend approach for any use strategy, with the goal that dividend approach influences the estimation of the firm. (Braouezec and Lehalle 2010) There is a noteworthy positive relationship between the execution of banks and the dividend payout of the inspected banks. (Uwuigbe, Jafaru and Ajayi, 2012) Dividends are not esteem pertinent within the sight of income in the valuation display. (Al-Hares, AbuGhazaleh and Haddad, 2012) The execution by and large enhances with an expanding dividend yield. (Henne, Ostrowski and Reichling 2007)

Bhatt and Pander (1994) in their examination directed an overview to learn the impression of CEOs about dividend choices. As per their investigation, the best five determinants of dividend arrangement are: Present earning, Current divident, Expected future income and Increasing capital base and liquidity. Earnings per Share and Taxes that Litzenberger and Ramaswamy (1980) exhibited appears to be reliable with negative connection between assess prompt tax induce and Earning per share such as EPS = Total income of common stock is divide by total outstanding share Tax is deducted by EBIT.

The Ex-Dividend Day More as of late, Kalay and Michaely (1993) The ex-dividend day around fourteen days after the declaration day and around fourteen day before the installment day. On the off chance that the stock will buy on the day preceding the ex-dividend the most recent day incorporate into the dividend announced. On the off chance that the stock will be bought upon the arrival of ex-dividend, the purchaser won't get the dividend. In the investigation led by Naeem and Nasir (2007) Dividend Policy in the Banking Sector observed the determinants and patterns of dividend approaches. The consequences of their investigation demonstrate that saving money areas are either unwilling to pay dividends or pay a low sum as dividends and their present dividend choices rely upon the earlier year dividends.

Sorts of Dividend Cash dividend is utilized for money installment paid by the normal and favored stocks to the investors. The firm now and again pays as stock dividends which is not quite the same as the trade dividends on the grounds that out which pay stock to the investor not money. It guarantees that exceptional additions to the investors. The desire of dividends by proprietor causes them to decide the offer esteem in this way, dividend arrangement is a critical choice taken by the financial chiefs of any organization. The dividend declaration gives data about the current of assets and permits the market toward evaluate the company's present income (Miller and Rock, 1985). Because of a noteworthy outcome, the expansion in the stock cost is unequal to the normal dividends. Stock cost is the sticker price of buying a security on a trade. Unpaid the way of the reduced estimation of dividend the stock cost may even outperform the market esteem which is known as the undervaluation in the market or exaggeration of financial specialist's evaluation. (Downs, 1991)

Investors expect dividend yet it isn't guaranteed. (Gittman, 2004) Basic stocks are hold by obvious proprietors of the business. Once in a while they are referred to as 'lingering proprietors' as they get whatever left in the wake of ending up of the organization. (Gittman, 2004; Higgins 1995) Another kind of stock is known as openly claimed stock. Regular stock possessed by a general gathering of disconnected speculators or institutional financial specialists is called as freely claimed stock. Be that as it may, all regular load of a firm possessed by a little gathering of financial specialists is signified as firmly claimed stock. At the point when all the stock is possessed by a solitary individual is known as exclusive stock. Because of the farthest point of number of offer, stock can be grouped in to four sorts. For example, approve share, extraordinary offer, treasury stock and issued stock. (Gittman, 2004)

Approved offers speak to the most extreme number of offers a firm permits to issue. Exceptional offers are hold by open. Treasury stock is repurchased by firm itself and it is never again considered as exceptional offer. As of late stock repurchase choice is exceptionally prominent as it can build stock an incentive by diminishing remarkable stock number. (Port, 1976) Port likewise proposed that organizations ought to abstain from issuing stock to pay dividend as they back off organization development. As indicated by Short and Welsch (1990), Johns (1998) and Port (1976), a dividend is a normally disseminated in real money shape to supply of an organization endorsed by the leading body of executive. It might likewise incorporate stock dividend or different types of installment. A stock dividend speaks to a dispersion of extra offers to normal investors. (Higgins, 1995) On the other hand, Ross et al. (2005) partitioned income into two sections; it is possible that it is held or paid as dividend.

While Wild et al. (2001), Johns (1998) and Kieso et al. (2004) contended that held income are the essential wellspring of dividend dissemination to the investor. Dividends are just money installments routinely made by companies to their investors. (Johns, 1998) He likewise determined that they are settled on the announcement by the leading body of the executives and can extend from zero to for all intents and purposes any sum the enterprise can stand to pay. Jones (2005) said that dividends are the main money installment an investor gets specifically from firm and these are the establishment of valuation for basic stocks. Stock value reaction to a sudden dividend change declaration is identified with the dividend inclinations of the negligible speculator in that firm where different things staying same. (Denis et al., 1994) Moreover, an organization, which changes dividend arrangement, is relied upon to encounter upward or descending patterns in share returns. (Gunasekarage et al., 2006) They additionally said that for the starting firms, the offer costs kept on rising even after the first sale of stock (IPOs).

Higgins (1995) said that if the organization will have less cash to contribute, or it should collect more cash from outside sources to influence similar speculations investors to assert on future income, which lessens share value appreciation. In addition, amid dividend declaration period stock cost additionally vacillate because of declaration of dividend. Mulugetta et al. (2002) inspected the effect of Standard and Poor's positioning changes on stock costs. Also, Affleck-Graves and Mendenhall (1992) found that stock cost responds following 8 days by and large up to 54 days of such gaining declaration. With this trust, Hampton (1996) said that estimation of stock increment by more dividend and offer remain underestimated by bring down dividend arrangement. Furthermore, he likewise demonstrated that there are two schools of thought in regards to with the impact of dividend on stick value, one is dividends don't influence showcase cost, and the other is dividend approaches effecting a company's position in money markets. . Benartzi et al. (1997), Ofer and Siegel's (1987) and Bae (1996) found a positive relationship between offer cost and dividend. Moreover, Campbell and Shiller (1988) found a connection between stock costs, dividend and expected dividends and he drives a conclusion that income and dividends is effective in foreseeing stock returns more than quite a while.

Dividend increment declarations are welcomed emphatically by financial specialists, while there are a few confirmations proposing speculators respond contrarily before dividend diminishing declarations. (Jais, Karim, Funaoka, and Abidin, 2009) The fowl close by hypothesis got the most elevated help. (Naser, Nuseibeh and Rashed, 2013) There was a propensity in America where a decrease in the offer value response to declaration of dividend installments since mid-1978. (Ammihud and Li 2002) The exact consequences of this examination indicated huge negative connection between share value unpredictability with two fundamental estimations of dividend arrangement which are dividend yield and dividend payout. (Hashemijoo, Ardekani, and Younesi, 2012) The consequences of this investigation demonstrate a positive and noteworthy connection between money dividends, held income, dividend per offer, and stock cost while stock cost is decidedly. (Asem and Tian, 2010)