Dividend Declaration and its Impact on Market

Performance of Selected commercial Banks Listed in

Dhaka Stock Exchange
Letter of Transmittal
23/3,BirUttam A.N.M Nuruzzaman Sarak,
Shyamoli, Mohammadpur
Dhaka-1207, Bangladesh
May 05, 2013
Abdullah Al Masum
Lecturer
Faculty of Business
ASA University Bangladesh (ASAUB)
Subject: Thesis report on Dividend Declaration and its Impact on Market Performance of
Selected Commercial Banks Listed in Dhaka Stock Exchange.
Dear Sir,
Enclosed is a Thesis report on Dividend Declaration and its Impact on Market Performance of
Selected Commercial Banks Listed in Dhaka Stock Exchange. This Thesis report contains
Introduction, Research Methodology, Results and Discussions, related to this Thesis report and
Findings and Conclusion. It shows me that how the Dividend Policy impact on the market price of the
share of different Commercial bank. It will help me to develop my knowledge about market behavior
and activity on such condition. This Thesis report was given by you (Thesis supervisor Abdullah Al
Masum) to improve my knowledge on Market condition and the impact of the divined policy. I
completed this Thesis report on scheduled time and met all the given requirements mentioned to
prepare this Thesis report.
As per my given requirement, this Thesis report includes title fly, title page, letter of transmittal, table
of contents and the other parts of this Thesis report. In the other parts of this Thesis report, this Thesis
report has been analyzed and Findings have been given. This Thesis report will help us to know the
impact of the dividend declaration strategy and the market performance of the different commercial
bank.
If you have any questions and/or comments regarding the interpretation of this Thesis report, please
enquire me. Thank you for giving me such an interesting work to do and I am delighted to prepare this
Thesis report under your guidance.

(Signature)
Sincerely,

Md. Shahnewas Roky

ID: 12-214-0071
Program: M.B.A
Batch:16th
Major in Finance
ASAUB

Enclosure: Final Thesis report.

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Dividend Declaration and its Impact on Market

Performance of Selected commercial Banks Listed in
Dhaka Stock Exchange
Declaration

I do solemnly declare that the work presented in this Report on Dividend Declaration and
its Impact on Market Performance of Selected Commercial Banks Listed in Dhaka
Stock Exchange is an original work done by me under the supervision of Abdullah Al
Masum, Lecturer, Department of Business Administration, ASA University Bangladesh.
No part of this report has been previously submitted to any other University/College/
Institutions/Organization for any academic certificate/ degree/ diploma/ qualification.
The work I have presented does not breach any existing copyright and no portion of report is
copied from any work done earlier for a degree or otherwise.
I further undertake to indemnify the Department against any loss or damage arising from
breach of forgoing obligation, if any.

(Signature)
Sincerely,

Md. Shahnewas Roky

ID: 12-2-14-0071
Program: M.B.A
Batch:16th
Major in Finance
ASAUB

Enclosure: Final Thesis report.

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Dividend Declaration and its Impact on Market

Performance of Selected commercial Banks Listed in
Dhaka Stock Exchange
Certificate from Guide

The Research Report entitled Dividend Declaration and its Impact on Market
Performance of Selected Commercial Banks Listed in Dhaka Stock Exchange has been
submitted to the Office of Placement & Alumni, in partial fulfillment of the requirements for
the degree of Masters of Business Administration, Major in Finance, Faculty of Business
Administration on 05 May, 2013 by Md. Shahnewas Roky, Id # 12-2-14-0071. The report
has been accepted and may be presented to the Internship Defense Committee for evaluation.
(Any opinions, suggestions made in this report are entirely that of the author of the report.
The University does not condone nor reject any of these opinions or suggestions).

(Signature)
Sincerely,

Abdullah Al Masum
Lecturer
Faculty of Business
ASA University Bangladesh (ASAUB)

Table of Contents
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Dividend Declaration and its Impact on Market

Performance of Selected commercial Banks Listed in
Dhaka Stock Exchange

CHAPTER
1.0:

CHAPTER
2.0:

CHAPTER
3.0:

Contents
Title Fly
Title Page
Letter of Transmittal
Declaration
Certificate from Guide
Table of Contents
Acknowledgment
Abstract
INTRODUCTION
1.1 Origin
1.2 Background
1.3 Scope
1.4 Objectives
1.5 Conceptual Frame Work
1.6 List of Key Variables
1.7 Operational Definitions
1.8 Limitations of the study
LITERATURE REVIEW
2.1 Literature Review
2.2 Dividend
2.3 Pay or Plough back
2.4 Dividend policy
2.5 Dividend payout
2.6 Dividend payout ratio
2.7 Ex-dividend date
2.8 Dividend notification
2.9 Dividend rate
2.10 Preferred stock
2.11 Preference shares
2.12 Stock dividend
2.13 Shareholder
2.14 Stockholder
METHODOLOGY
3.1 Study Design
3.2 Study Period
3.3 Study Population
3.4 Sample Size Determination
3.5 Sampling technique
3.6 Data Collection Technique
3.7 Data Processing and Analysis
Page 6

Page No.
I
II
III
IV
V
VI-VII
VIII
IX
1-7
2
2-3
3
3-4
4
4
5-6
7
8-14
8-11
11
11
12
12
12
12
13
13
13
13-14
14
14
14
1516
16
16
16-17
17
17
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Dividend Declaration and its Impact on Market

Performance of Selected commercial Banks Listed in
Dhaka Stock Exchange
CHAPTER
4.0:

CHAPTER
5.0:

CHAPTER
6.0:

3.8 Ethical Considerations

OVER VIEW OF THE BANK

17
18-50

4.1 Overview of Banking Industry in

Bangladesh
4.2 Overview of the Selected banks
FINDING AND DISCUSSION

19
20-50
51-58

5.1 Pearson Correlation

5.2 Linier Regression
CONCLUSION

52-55
56-57
58-59

6.1 Conclusion
Reference
Appendix

59
60
61-63

List of Tables
CHAPTER 5.0:

5.1 Pearson Correlation

5.2 Linier Regression

Acknowledgment
Page 7

52
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Dividend Declaration and its Impact on Market

Performance of Selected commercial Banks Listed in
Dhaka Stock Exchange
Education involves not only reading books and doing exercise but also acquiring knowledge
through doing something practically. This report has designed only for considering that
objective.

During the period of preparing the Thesis report on The Dividend Declaration and its Impact
on Market Performance of Selected Commercial Banks Listed in Dhaka Stock Exchange , I had
gained altruistic assistance from a number of persons including my honorable and respectable
Thesis supervisor Abdullah Al Masum, Lecturer, Faculty of Business, ASAUB.

Last of all, I would like to thanks Almighty Allah, my parents, my friends and teachers, who
were been always helpful with me by providing useful information. I also thank my friends
for their encouragement and help. I deeply wish to pay highest tribute to my parents for their
love, support, encouragement and advice. To them I dedicate this study.

Abstract

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Dividend Declaration and its Impact on Market

Performance of Selected commercial Banks Listed in
Dhaka Stock Exchange
Dividend policy is a widely researched topic in the field of investments and finance but still it
remains a mystery that whether Dividend Policy affects the Stock Prices or not. The results of
researches conducted in various stock markets are different. There are many internal and
external factors, which simultaneously affect stock prices and it is almost impossible to
segregate the effect of each so the variations remain. This paper empirically estimates excess
stock market returns for ten out of the thirty Dhaka Stock Exchange listed private commercial
banks in Bangladesh during the period of December 2007 to December 2011. Attempts are
made to examine what kind of relationship exists between dividend policy and stock market
returns of private commercial banks in Bangladesh, and to what degree the returns on stocks
can be explained by their respective dividend policy for the same period of time. Various
theories related to dividend policy are tested in various parts of the world with different
results and findings. Various other articles are reviewed, written in Bangladesh and abroad to
see the significance of dividend policy on the stock prices and to compare the results of this
research with those conducted earlier. Sample size is large i.e. almost one third of the total
listed companies of Dhaka Stock Exchange so the results are reliable and valid. In the last
decade stock market of Bangladesh went through many changes and huge ups and downs
were seen. The economic crisis of the world in year 2010-11 also affected the market
adversely. In the last couple of years the markets have again try to shown steady upward
trend. All these fluctuations in the stock prices due to external factors, including international
factors, make it difficult to check the impact of dividend policy. Here it is also pertinent to
mention that stock markets of Bangladesh are mainly speculative and capital gains are mostly
sought by investors, particularly individual investors. Institutions and long term investors
give due consideration to dividends and dividend polices of companies, which is a large and
significant portion of the total investment in the stock markets. Panel data approach is used to
explain the relationship between dividends and stock prices after controlling the variables like
Earnings per Share, Return on Equity, Dividend Per Share, Retained Ratio have positive
relation with Stock Prices and significantly explain the variations in the market prices of
shares, while the Return on Assets, Dividend Yield and Retained Earnings Per Share has
negative, insignificant relation with stock prices. Overall results of this study indicate that
Dividend Policy has significant positive effect on Stock Prices.

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