Market Reactions to Dividend Increases and Cuts: A Decade-Long Event Study Analysis of the Warsaw Stock Exchange
DOI:
https://doi.org/10.15611/fins.2025.1.04Keywords:
dividend policy, event study, emerging markets, Warsaw Stock Exchange, abnormal returnsAbstract
Aim: This study examines how dividend increases and cuts influence stock prices on the Warsaw Stock Exchange over a decade, testing the signaling hypothesis and assessing market efficiency in an emerging market context.
Methodology: Using an event study methodology, the author analysed 395 dividend increases and 232 decreases (2015-2024). Abnormal returns (AAR, CAAR) were calculated via the Market Model and Constant Mean Model, with statistical significance tested using one-tailed t-tests.
Findings: Dividend increases triggered immediate positive reactions (+1.39% AAR on announcement day, p < 0.005), while cuts led to sharp declines (-1.23% AAR, p < 0.005). Cumulative effects were asymmetric: CAAR for decreases persisted at -2.97% (day +16), whereas post-announcement gains for increases partially reversed. Firms raising dividends exhibited higher yield (5.19%) and payout ratios (59.48%), signalling stability.
Implications and recommendations: Practitioners should prioritise dividend policy as a strategic signal, particularly in emerging markets where reactions are amplified.
Originality/value: This is the first decade-long event study on the WSE to compare dividend increases and cuts, offering insights into investor behaviour in Central and Eastern Europe. The dual-model approach strengthens
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Copyright (c) 2025 Miłosz Michałowski
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Accepted 2025-07-28
Published 2025-09-23
