Shareholders’ Preferences, Business Cycles and Market Reactions to Dividend Announcements in Public Companies – Empirical Evidence

The effect of corporate decisions concerning the profit distribution on market value of a company has been addressed by numerous empirical studies. Observations carried out in developed markets show that dividend initiation decisions result in an increase of abnormal returns. The main objective of this paper is to present results of shareholders' reaction to dividend initiation decisions and an impact of market cycles on the Warsaw Stock Exchange (WSE). At the beginning, a review of similar studies is carried out. Next, the sample selection and methodology were discussed. The shareholders' reactions for the whole sample were positive but abnormal returns under two models were different in the event window (-60, 60) and not homogeneous. In the case of over 45% of dividend initiations the reaction was negative. Moreover, the author have indicated that observed market business cycles may influence shareholders' reactions and abnormal returns