Abnormal returns, Colombo Stock Exchange, Event analysis methodology, Stock dividend announcements
This study examines the market reaction to Sri Lankan stock dividends from 1998 to 2007 using the event analysis methodology. The positive abnormal returns in Sri Lanka (Colombo Stock Exchange) are much higher than any other international findings on the announcement day. Even after controlling the contaminated information, abnormal returns for pure stock dividends are positively significant on the announcement day. Further, announcement day abnormal returns are positively related with the size of the stock dividend announcement. Therefore these findings, based on Colombo Stock Exchange expand the empirical evidence on the signaling hypothesis of stock dividends.