Abstract

Vietnamese stock market is an interesting laboratory to examine the reaction of stock price to dividend announcements due to its taxation regulations. The study employs traditional event study methodology to investigate the impact of dividend announcements on stock prices in a special institutional environment of Vietnamese stock market. The research sample includes 979 dividend announcements made by 233 companies listed on HOSE from 2008 to 2014. Although there is no preferential tax treatment of dividends to capitals gains in Vietnamese stock market, this study finds that dividend announcements lead to positive effects on stock prices and trading volume in the stock market. Although dividend announcements in three clusters including dividend increases, dividend decreases and no change have positive impacts on stock prices, the cluster of increases has the largest effect. Moreover, examining the abnormal return behavior, we also find evidence of insider trading before the announcement day.

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