Dividend policy and stock returns : evidence from Hong Kong listed companies

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Dividend policy and stock returns : evidence from Hong Kong listed companies

 

Author: Li, Siu-ha Rita
Title: Dividend policy and stock returns : evidence from Hong Kong listed companies
Degree: M.B.A.
Year: 1998
Subject: Corporations -- China -- Hong Kong -- Finance
Dividends -- China -- Hong Kong
Stocks -- China -- Hong Kong
Rate of return -- China -- Hong Kong
Hong Kong Polytechnic University -- Dissertations
Department: Dept. of Management
Pages: [3], 61, [34] leaves : ill. ; 30 cm
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b1436965
URI: http://theses.lib.polyu.edu.hk/handle/200/1952
Abstract: This is paper examines the relationship between stock returns, dividend policy, market beta and firm size of listed companies in Hong Kong. This study includes a long term cross-sectional analysis and time series analysis which covers a period of fifteen years from January 1982 to December 1996. A preliminary analysis of the dividend policies of listed companies in Hong Kong reveals that there is a constant dividend payout ratio in some of the companies over time, which is more evident for the companies in the Finance and Utilities groups. In order to investigate the relationship between stock return, dividend yield, market beta and firm size, a correlation analysis and regression analysis have been performed. The findings of this study suggest that there is a significant and negative relationship between stock return and dividend yield, i.e. the cross-sectional variations of stock return could be explained by the dividend yield. However, the relationship between stock return and market beta is weak which coincides with that of Chui & Wei (1997) despite the Capital Asset Pricing Model (CAPM) developed by Sharpe (1964), Linter (1965) and Black (1972) states that the expected return on an asset is positively related to its market beta and that beta suffices enough to describe the cross-sectional variation of expected returns. Moreover, recent evidence in the U.S. and Japan shows that the market beta cannot explain the cross-sectional variation of expected returns on U.S. stock and Japanese stock. Contrary to the findings of Chui & Wei (1997) and some studies in the U.S. and Japan, this study suggests that the relationship between stock return and firm size is weak. Despite the existence of a significant relationship between stock return and dividend yield, it is revealed that dividend yield could only explain approximately 15% of the cross-sectional variations of stock return. In order to obtain more accurate results, it is suggested to identify more factors affecting stock return to be included in any future studies. In addition, this study is only a starting point to study the dividend issue, it is hoped that more in-depth studies to explore the issue will be performed in the future.

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