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The Impact Of Dividend Announcement OnStock Market
Dividend is that part of the earnings of a corporation that is distributed to its shareholders whichis usually paid quarterly.
But why do companies pay dividends? In Finland, dividend policy has always been the main
concern according to some few empirical studies. But they normally based it on assumptions
that each security has an intrinsic value based on the economic conditions of the firm. These
economic conditions are determined on many things like: earnings, dividends, capital structure
and growth potential. We called it the fundamental stock analysis.
Some stocks, especially blue chips, pay dividends. This means that for every share you own,
you are paid a portion of the company's earnings. For example, for every share own, you will
get sent $0.15 every year. Most companies pay dividends (four times a year). This study
focuses on dividend policy of companies listed on the stock exchange of Mauritius. Since early
1960, the dividend debate has been lively interesting, why it is like that? As some economists
have analysed the effect on the value of the firm and explored the data of evidence that
dividend policy affects security prices and investors behaviour.
In developed countries managers and economists together have recognised that dividend policy
plays an important role in the overall corporate strategy since the decision between paying
dividends and retaining earnings has been taken seriously by investors. Indeed the dividend
debate has not been restricted not only to equity markets in developed countries but has been
carried out in emerging markets. Some Studies have shown that dividend policy in those
markets is often different from the norms that have been accepted. In developed countries and
that in emerging markets firms place more emphasis on dividend payout ratios than they do on
the level of dividend paid. As a result dividend payments tend to be more volatile in emerging
markets than in the developed countries
1.2-How Mauritius is as an emerging MarketMauritius is a fast developing independent island in the Indian Ocean. It has followed a classic
pattern off economic development, moving from agricultural based economy in the 1960 to a
manufacturing based in the 1970 and 1980. Since then, we can see how Mauritius how
developed its economy. The Mauritian economy was then noticed by exceptionally high
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increase in GDP (GROSS DOMESTIC PRODUCT) and the achievement of full employment. Its
Normal that Mauritius could not sustain such an economic growth rate by relying only on
Agriculture and manufacturing industries. That is how Mauritius comes with the idea to diversify
its economy and henceforth integrate into the world economy. He first diversifies f into the
financial sector. The successful economic achievement in the 1980s brings a rapid growth in
this sector and hence in 1988 the stock Exchange was established in Mauritius.
1.3-Objective of Study
This study focuses on dividend price on the sevencompanies listed on stock exchange of Mauritius
for the year 2010.It is intended to find out howdividend changes before the final dividend dateand after the final dividend date .
1.4-Structure of Project
The Project was mainly based on dividend
reactions on the Seven Companies .It Includes datadownloaded from the website or taken fromauthors of dividend policy and also somecommunication which was exchanged by the Headof department of Sbm Securities which helped meto find out the data.
2 LITERATURE REVIEW
2.1 Theoretical View Points
Normally we have two different theories that explain what the relationship between Dividend
Policy and the Price of Shares. They are categorized into two groups:
The Irrelevance School
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The Relevance School
In the Irrelevance School we have Merton and Miller .
This man clearly state that dividend dont really affect value , He also said that there was now a
substantial agreement within the academic community which is based in turn on many careful,scientific statistical studies and there is no systematic exploitable relation between a firm
dividend policy and the value of its shares.
Normally that value is governed by its earnings or more precisely by its earnings power.
It is of considerable importance the effect of a frim dividend policy on the current price of its
shares ...not only to the corporate officials . but also to those investors who are planning
portfolios and also to the economists that are seeking to understand and appraise the
functioning of the capital Markets.
According to similar ideas like JOHN FREEAR (1980), the whole question of dividend policy is
controversial. Like some say that it has no effect whatever on the finance market assessment of
the value of a company, others argue that the market pays much more attention in assessing
dividends that to earnings. Indeed the relationship between dividend and the value of the share
is not clear cut. Normally a Finance Manager must understand the various conflicting factors
first which influence the dividend policy before he decide how to allocate its companys earni ngs
into dividends and retained earnings. Another important aspect of the dividend policy is that we
must determine what the amount of earningsthat should be distributed to shareholders and
which amount we must kept in the firm .Indeed it can be a tough task for Mauritius as we have
just diversify into the Financial Sector .
Retained earnings are the most significant internal sources of financing the growth of the firm
whereas dividend constitutes the used of the firm funds.
From a shareholder point of view, dividends may be considered desirable because they tend to
increase their current wealth. Objective of a dividend policy accordingly should be to maximise a
shareholders return so that value of its investment is maximised. As the shareholders return
consists of 2 components:
Dividends
Capital Gains where Dividend policy has a direct influence .
.
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Black and Scholes(1974)
Black and Scholes (1974) views of dividend they argued that in equilibrium setting with the
taxes the supply of shares which have specific dividend yields will equal the demand for shares
with the same dividends. It can be seen as a clientele effect where it will prevent any
corporation from affecting the market price of the shares. This is done through manipulation of
the dividend yield. In(1978) Miller and they have again come with a new point that vehicles do
exist to compensate for the different taxes on dividend and capital gains . we can see the how
the irrelevancy of dividends applies here as dividends in valuation may even hold in a world with
taxes.
GRAHAM AND DODDs
Graham and Dodd (1969) argued that the sole purpose for the existence of the corporation is to
pay dividends and firms that normally pay higher dividends must sell their shares at higher
prices. in a perfect market, everything is perfect thus dividend policy has no effect on either the
price of a firms stock or its cost of capital, shareholders wealth is not affected by the dividend
decision and therefore they would be indifferent between dividends and capital gains.
Other different Views have been developed by bhattacharya (1979) ,Miller and Rock(1985) and
John and Williams (1985) suggest that firms change their dividend payout to signal future
performance . Since the management knows much more about its firm than outsiders so, the
only way for management to relay the information to the market is by changing their dividend
payout pattern . Many empirical studies have confirmed the theory. For example, Aharony and
Swary (1980) find that the market still reacts positively to the announcements even after
controlling the contemporaneous earnings announcements. Asquith and Mullins (1986)
investigated the first dividend announcement in the corporate history or dividend initiation after
10 year interval and find that the stock market reacts stronger to this type of extreme dividend
announcements. Healy and Palepu(1988) find similar evidence on the firms that initiate and omit
their dividend . The magnitude of negative stock market reaction is more severe on dividend
omission firms .Employing more samples size, Michaely et al.(1995) and robin(1998)they bothreached to the same conclusions. Docking and Koch (2005) find that stock market reaction to
dividend announcement is sensitive to the direction or volatility of the stock market . Agency
theory provides an alternative explanation of the market reaction to dividend announcements.
Easterbrook (1984) and Jensen (1986) suggest that dividend act as discipline tool to the
management.
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Both hypotheses imply that the stock market should react in the same direction as dividends
payment. If the market is efficient, then the subsequent operating performance should improve
.However, the evidence on the subsequent performace is mixed. These contradictory results
suggest that the evidence so far on the post operating performance of dividend paying firms is
inconclusive. Based on this reasoning the stock market reacts positively to announcements of a
dividend increase. Firms that tend to reduce their dividend payout the, stock market reacts
negatively on the chance that the management might invest in an unprofitable business.
Briston and Tomkins (1970)s
Briston and Tomkins (1970) agreed with Lintners conclusions when they studied the impact of
corporations tax on dividends where earnings rise, the increase tends to be shared between
retentions and dividends, with retention which tend to take the larger share.
Relevance School
Gordon and Lintner they didnt agree with Merton and Miller, as they said that dividends are less
risky than capital gains.
Gordon (1959)s
Gordon in his 1959 study found that the payout ratios and the price earnings ratios positively
they are related. They conclude that the causal mechanism was from Dividend to share value,that is high pay out meant high prices relating to current earnings .
Lintner 1956s study of Dividend Policy
Dividend as the main method of distributing cash to shareholders has received considerable
prior attention in the finance literature. Lintner (1956) suggest that firms prefer to smooth their
dividend and reluctant to change their payout policy . The management is reluctant to cut
dividend because it might send negative signal o investor and reluctant to increase payout for
fear that it might not sustainable in the future. Following this, many empirical studies have been
preformed and concentrated on how the stock market reacts to the announcements . Almost all
of the studies agree that dividend payout and stock market reaction move in the same direction.
That means Stock Market reacts positively on dividend increase announcement. Almost all of
the studies agree that dividend payout and stock market reaction move in the same direction.
That means stock market react positively on dividend increase announcement and negatively
on dividend decrease announcement. Two of the most widely discussed hypotheses on the
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stock market behaviour on dividend announcement are the information signalling hypothesis
and the free cash flow hypothesis.
Andrew P.Shepherd (1972)s
The effect of a firm's dividend policy on the current price of its shares is a matter of considerable
importance, not only to the corporate officials, who must set the policy, but to investors planning
portfolios and to economists seeking to understand and appraise the functioning of capital
markets. Do companies with generous distribution policies consistently sell at a premium over
those with small payments? Is the reverse ever true? If so, under what conditions? Is there an
optimum payment ratio or range of ratios that maximises the current worth of the shares?
Although these questions of fact have been the subject of many empirical studies in recent
years, no consensus has yet been achieved.
2.2 DIVIDEND POLICY: CONCEPTS AND TERMINOLOGY
Dividend policy may be defined as a trade off between retaining earnings on the one-hand and
paying out cash and issuing new shares normally the word dividends describe the periodic
payments which company make to service their equity capital. When we analylse a firm
dividend policy the key statistics is the payout ratio which is the proportion of distributable profit
actually distributed.
Dividend pay-out ratio= (Dividend per share /Earnings per share)
2.3-THE RELEVANCE SCHOOL
Relevance of DIVIDEND POLICY: Bird in- the- Hand theory
Gordon (1963) and Lintner(1962) disagreed with M&M ,arguing that dividends are less risky
than capital gains ,so a firm should set a high dividend payout ratio an offer a high dividend yield
to maximise its stock price . Merton and Miller called this the birdinthe- hand fallacy .The
fallacy is that cash (Non-Investment) which is preferable to investment .It actually ignores the
fact that the procedure for evaluating an investment takes account of the investment risk ,which
is independent of the source of finance.
Moreover, in some cases, the firm will be able to borrow at preferential rates and enjoy better
facilities. On the other hand, Bhattacharya (1979) explains that there is a certain level of risk
associated with dividends. This risk is based on the micro a macro environment of the firm; That
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is the business line the firm operates, the location of the business, labour power, human capital,
competitive forces etc. The risk adjusted discount rate takes into account this risk.
2.4 CLIENTELE EFFECT
The clientele effect is a theory which describes the intention of investors to invest in firms which
suits their factor endowment; among the most common ones is their tax circumstance. It can be
said that there is an inverse relationship between stock returns (Dividends) and tax levels. For
instance an investor in a high tax bracket would prefer to invest in stock giving a low rate of
return so as to pay less tax .on the other hand, an investor in a low tax bracket would definitely
invest in stocks with higher returns as he currently does not have large tax liability. Petit (1977)
showed that older investors (retired persons) were more likely to hold high dividend shares
because they pay lower income tax. In this case we call it the tax clientele effect. Hence the
clientele effect refers to firms making their dividend policy decisions based the customers they
would like to attach to themselves. (Litzenberger and Ramasawmy 1979).
Most firms do not behave in a manner completely consistent with theory. In fact firms appear to
have an overriding preference for stable, gradually increasing dividends, regardless of apparent
investment opportunities. The danger of such a policy is that companies with stable dividend
policy create a clientele which depends on dividend income to meet their living and operating
expenses. Because of the serious depressing effect on investors due to a dividend cut, directors
have to maintain stability of dividends during lean years even though financial prudence would
indicate elimination of dividends or a cut in it.
2.5 Earnings Theories
Many researchers are critical of dividend theories. In traditional earning theories, the market
price of a share depends on the company profits. Dividends have no effect on the share price.
Shareholders are presumed to be so traditional that, when the company keeps the profits and
does not pay dividends, they expect the firm to invest capital so that it gives at least their rate of
return. Dividend policy then does not affect the market price of the share.
3 Stock Market of Mauritius
The Stock Exchange of Mauritius Ltd (SEM) was incorporated in Mauritius on March 30, 1989
under the Stock Exchange Act 1988, as a private limited company responsible for the operation
and promotion of an efficient and regulated securities market in Mauritius. Since October 6th,
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2008, the SEM has become a public company, and throughout the coming years. SEM is today
one of the leading Exchanges in Africa and a member of the World Federation of Exchanges
(WFE).
The SEM operates two markets: the Official Market, the Development & Enterprise Market
(DEM). The Official Market started its operations in 1989 with five listed companies and a
market capitalisation of nearly USD 92 million. In Today Operations, there are 37 companies
listed on the Official Market representing a market capitalisation of nearly US$ 6,015.64 million
as at 28 February 2011. The DEM (Development and Enterprise Market) has been launched on
4 August 2006 and there are presently 50 companies listed on this market with a market
capitalisation of nearly US$ 1,851.96 million as at 28 February 2011.
The stock market was opened to foreign investors along with the lifting of exchange control in
1994. Foreign investors do not need to seek approval to trade their shares unless its purpose
was for the management control or anything with legal purpose or if its concerned with the
control of more than 15% in a sugar industry... Foreign investors also benefit from numerous
incentives such as revenue on sale of shares can be freely repatriated and there are no
withholding tax on dividends and no tax on capital gains.
Central Depository System (CDS) was implemented in January 1997 has brought about efficient
clearing and settlement of trades and at the same time reduced some of the inherent risks in the
process. CDS has the support of the Bank of Mauritius whch acts a as a clearing bank he
ensures delivery versus payment (DVP) on a T+3 rolling basis. The CDS also provides for a
Guarantee Fund Mechanism to guarantee settlement failures of participants.
SEM's Automated Trading System (SEMATS) was launched on 29th June 2001. It has an
electronic trading system built on third generation technology. SEMATS puts an end to
traditional trading patterns. . Trading in securities is conducted through dedicated trading
workstations located at intermediate dealers and linked by communication lines to the SEM
trading engine.
Treasury Bills trading on the market has been introduced by the SEM in December 2003, a first
step of a process aimed at the setting up of an active secondary market for governmentinstruments.
They attained Membership status of the World Federation of Exchanges (WFE) in November
2005whch also constituted an important milestone that has enabled the SEM to join the league
of stock exchanges that are compliant with the stringent standards and market principles
established by the WFE. SEM set up in 2006 the Development & Enterprise Market (DEM),
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which is a market designed for Small and Medium-sized Enterprises (SMEs) and newly set-up
companies which possess a sound business plan and demonstrate a good growth potential. It is
meant for companies wishing to avail themselves of the advantages and facilities provided by
an organised and regulated market to raise capital to fund their future growth, improve liquidity
in their shares, obtain an objective market valuation of their shares and enhance their overall
corporate image.With this membership all securities that are traded on the Stock Market wil
have to meet the HMRC interpretation.It also reinforces SEM attractiveness for the global funds
specilalizeez products .
Presently SEM is orienting its present activities and gradually moving away from an equity-
based domestic Exchange to a multi-product internationally oriented Exchange. In early 2010,
the SEM has brought some major changes to its Listing Rules to align them with the Collective
Investment Schemes Regulations 2008 with a view to positioning the SEM as an attractive
venue for the Listing of Global and Specialised Funds. Also some changes in the Listing Rules
so to attract the listing of Global and Specialised Funds on the Exchange which fits very well
with the strategic shift currently underway at the SEM. The Listing Rules has been made more
flexible to reflect the specific attributes and characteristics of the Specialised Funds it would like
to list on the SEM. Since the Month of March 2010 SEM been elected by the Cayman Islands
Monetary Authority(CIMA),which is an Approved Stock Exchange by virtue of its membership of
the World Federation of Exchanges . The purpose of this was for the CIMAs Mutual Funds Law,
Banks and Trust Companies Law etc..
This 31 January 2011, SEM has also been designated by the United Kingdoms Her Majestys
Revenue and Customs (HMRC), as a recognised Stock Exchange under section 1005 (1) (b)
Income Tax Act 2007. In the Board of the SEM, it shall not consist of not more than ten directors
and also at least two shall be members of the Industry; and
at least one shall be an Executive Director;
No person can be appointed as a Director without approval of the FSC accrording to section 24
of the Financial Services Act 2007
We have two Types of Market indices used, they are the following namely the Official MarketIndices and Development and Enterprise Market Indices.
3.1 Official Market Indices includes the following:
SEMDEX
SEMTRI
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SEM-7
Figure 3.1.1(a)
Figure 3.1.1(a) give you a clear idea how Semdex has evolves for the period 2010.
Development and Enterprise Market Indices include the following DEMEX DEMTRI. The Official
List-This is normally for the listed shares. There are around 40 Companies in this Market. The
Over-The Counter MarketThis is for the unlisted shares. This Market has nearly 80
Companies that are unlisted. Also, there are nearly 10 more companies which are cited for their
debentures in Mauritius Stock Exchange .Mauritius Stock Exchange has two dual listed funds
which can be cited both in London stock exchange and the stock Exchange of Mauritius.
Types of Companies enlisted in the Mauritius Stock Exchange and Turnover for year 2010:
Investment
Industries
Insurance and Banks
Hotels and Leisure
Transports
Sugar
Commerce
Nature of Trading
Open Claim
Order Driven
Single Price Auction System
Also some major developments which have taken place in Mauritius Stock Exchange:
A new Electronic Clearing and settlement system is being established
A daily trading system is introduced
3.2-SEM Mission
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The SEM is committed to becoming a World Class Stock Exchange. They will strive hard to
position the Exchange as a service-driven and operationally excellent organisation with world-
class trading and settlement capabilities, which incorporate and maintain the fundamental
principles of market integrity, investor protection and efficient price discovery.
3.3-General Listing Requirements
A company seeking a listing on the Official List of the Stock Exchange of Mauritius (SEM)
should:
Demonstrate an adequate trading record with published or filed accounts for the three years
preceding the application for listing;
Have an expected market capitalisation of not less than Rs 20 million; and
Issue at least 25% of the shares to the public, with a minimum of 200 shareholders, though thisthreshold may be phased in, with companies issuing 15% of their shares initially, increasing this
proportion to 20% within three years and 25% by the end of five years.
Other listing requirements such as submission of various documentation, which provide detailed
information on the company, how they must conform to the Rules and Regulations of the SEM,
and Listing Particulars to be issued to the public prior to the listing. The Listing Particulars must
contain all documents provided for in the Listing Rules for the investors to be reasonably well
informed about the securities quoted and the issuer, including the following:
The assets and liabilities of the issuer
The financial position of the issuer
The stated capital of the issuer
The profits and losses of the issuer
The directorship of the issuer
The rights attaching to the securities
The prospects of the issuer
3.4-History of FSC
It was established as the regulator for the non-Bank financial Services Sector under the
Financial Services Development Act 2001. Examples of these sector are : Stock Exchange
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Commission ,Insurance (Insurance Division of the Ministry of Economic Development .Financial
Services and Corporate Affairs and Global Business (MOBAA)
MOBAA stands for Mauritius Offshore Business Activities Authoritys regulates all these sectors
and supervises all their activities. Their non-Bank Financial Sector includes those companies
that are involve in Insurance &Pensions, Capital Markets Operations ,Leasing &Credit Finance
as well as Global Business activities .FSC strive to bring a sound ,stable and competitive
international financial services centre . FSC also ensures that there is transparency, fairness
and equity in the non-bank Financial Institutions and capital Markets ,while at the same time
they ensure the protection of investors that are involved.
Entities falling under non-bank financial institutions category are:
Insurance & re-insurance companies
Leasing companies
Credit finance companies
Market intermediaries: fund managers, portfolio managers, investment managers / asset
managers, custodians, brokers, investment advisers
Cooperative credit unions
4 METHODOLOGY
4.1 Introduction
The objective of this study is to find out the impact of dividend policy of the seven top
companies on the Stock Market of Mauritius and to find out how dividend price changes 15 days
before the final dividend date and 15 days after the final dividend were paid .The stock
exchange of Mauritius sets the background for this chapter which describes the data anaylsis
and interpretation of dividend, share prices of the seven listed companies and the market
capitalisation of the listed companies.
4.2- Objective
The data used in this study comprises of the seven top companies listed on the stock exchange
of Mauritius for the year 2010 in terms of their market capitalisation.
COMPANIES' PERFORMANCE IN 2010
TOP 10 COMPANIES YEAR 2010 : MARKET CAPITALISATION (Rs) YEAR END
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Rank
Securities
Rs Billion
%of Total Market Capitalisation
1
The Mauritius Commercial Bank Ltd
41.56
23.35
2
2 State Bank of Mauritius Ltd
27.49
15.44
3
3 New Mauritius Hotels Ltd
17.76
9.97
4
4 ENL Land Ltd
9.66
5.43
5
5 Harel Freres Ltd
8.45
4.75
6
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6 Rogers & Co. Ltd
7.38
4.15
7
7 Sun Resorts Ltd
6.35
3.57
8
8 Ireland Blyth Ltd
5.29
2.97
9
9 Omnicane Ltd
4.96
2.79
10
10 Promotion and Development
4.04
2.27
Source: Fact book 2010 (Sem)
Savannah Sugar Estates became ENL Land Ltd on 30th November 2010 as such data was not
available for this company thus it was disregard from the data.
Mon Tresor Mon Desert became Omnicane on 13th July 2009,thus some discrepancies about
the data,it was removed form the study .
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The date needed were extracted from many sources namely Fact book 2010 of SEM,as well as
database of one of the eleven stock broking companies namely State bank securities . Data for
foreign companies have been ignored in this study.
TOP 7 COMPANIES YEAR 2010 : TURNOVER (Rs)
Rank
Securities
% of Total Market Turnover
1
The Mauritius Commercial Bank Ltd
26.37
2
State Bank of Mauritius Ltd
9.37
3
New Mauritius Hotels Ltd
N/A
4
Harel Freres Ltd
N/A
5
Rogers & Co. Ltd
2.67
6
Sun Resorts Ltd
4.71
7
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Ireland Blyth Ltd
N/A
4.3 -The data collected on listed companies has been based upon :
Market capitalisation of the top seven companies on Stock Exchange.
Dividend paid on the official market for the period 2010 of the seven listed companies
Rank
Companies
Dividend Date
1
The Mauritius Commercial Bank Ltd
06-Jul-10
2
State Bank of Mauritius Ltd
13-Sep-10
3
New Mauritius Hotels Ltd
08-Oct-10
4
Harel Freres Ltd
08-Dec-10
5
Rogers & Co. Ltd
29-Sep-10
6
Sun Resorts Ltd
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01-Mar-10
7
Ireland Blyth Ltd
12-Jul-10
Data been taken date for 15 days before and after the dividend date ,unfortunately for some
companies there are some discrepancies as data are only for 12 days or 14 or some even for
11 day .The DPS also knows as the dividend per share is the amount of cash paid to
shareholders. EPS also knows as Earnings per Shares is the portion of a companys profit
allocated to each outstanding share of common stock and included in Appendix... It is normally
serves as an indicator of a companys profitability .Dividend Yieldnormally is the financial ratio.
4.4.1 History about the Seven Companies
Mauritius Commercial Bank
For Mauritius Commercial Bank the final dividend date on Stock Market of Mauritius was on 06
July 2010.
Mcb is known as the Mauritian bank, it is relatively well behaved with dividends earnings and
assets growth and without reserve accounting and extraordinary items adjustments. According
to the annual report of Mcb exchange rates around the world have grayed a lot in 2009 and
various periods of 2010 on account of heightened uncertainty levels and ever-changing signals
about the healthiness of the economic climate which led to a shift in the prices .
State Bank of Mauritius Ltd
State bank of Mauritius (Sbm) is the second largest bank in Mauritius with a market share of
about 25% of domestic banking assets. It has 42 domestic branches, and three branches in
India. As per annual reports of Sbm total dividends payable for the year thus amounting to
Rs710 M. Total equity attributable to shareholders rose by 13.2 % to reach Rs14.7.The sbm
share price which was opened at Rs70 having already recovered 85.2% from the low of
Rs37.80 amidst high degree of risk aversion and uncharacteristic volatility in Financial Marketsworldwide.Rise and Fall in economic life have also impacted the share price.
Rogers & Co. Ltd
Rogers and Co Ltd operates in the financial services, Hotels, Leisure, Logistics, Property, Real
Estate, agricultural and travel and aviation sectors primarily in Mauritius. The company also
offers a range of financial services such as insurance ,Stockbroking,Factoring ,Consumer Credit
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,leasing .Rogers have a payout ratio that moved from 11.59 to 11.91 and their dividend per
share fell from 12.00 in 2009 to 9.00 in 2010 while their earnings per share 25.88 in 2009 to
24.61 in 2010.
Sun Resorts Ltd
Sun Resorts Mauritius is a major Mauritian hotel group that currently owns and manages five
resorts in Mauritius and in the Maldives - Le Touessrok, Long Beach, Sugar Beach Resort, La
Pirogue and Kanuhura in the Maldives.As we know last year in Sun Resorts financial
statements the profit before tax was Rs15, 102(Million), where they invest in many of their
companies abroad.
Ireland Blyth Ltd
Ireland Blyth Limited was incorporated as a private company on 14th July 1972 following the
merger of Blyth Brothers & Co. Ltd and Ireland Fraser & Co. Ltd, both of which had been trading
in Mauritius since the early nineteenth century.
Ireland Blyth Limited remained a private company until 1994 when it was converted into public
and was admitted on the Official List of the Stock Exchange of Mauritius. Ireland Blyth Limited is
one of the largest groups in Mauritius with activities in a wide range of sectors from financial
services, Aviation, Food storage, also in engineering Department.
Harel Frres
Harel Frres Limited (Harel Frres) is a conglomerate established in Mauritius and operating
regionally. Incorporated in July 1960, HFL is one of the major sugar groups in Mauritius,
cultivating some 6,000 hectares of sugar cane land in the northern part of the island. It has,
throughout the years, diversified its activities from an essentially sugar-oriented company to one
with interests in energy production, alcohol production and commercial distribution, property
development and construction as well as financial services.
Harel Frres is quoted on the Official List of the Stock Exchange of Mauritius and is on the
SEM7 list. Harel Frres has also expanded in Africa; it is present in the Ivory Coast through its
investment in two sugar factories and is also in Madagascar.
New Mauritius Hotels
New Mauritius Hotels Limited, with its subsidiaries they are engaged in the resort Hotel
business more precisely. They operates eight resort Hotels and an airline catering unit in
Mauritius .They also operates one hotel in the island of Seychelles, still under the beachcomber
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Brand . It also involved in other activities like Tour operations in France, the Europe and other
countries. Its location is situated in Curepipe.
5 Analysis
5.1.1Mauritius Commercial Bank
5.1.2State Bank of Mauritius
5.1.3Rogers Co Ltd
5.1.4Sun Resorts Ltd
5.1.5Ireland Blyth
5.1.6 Harel Frres.
5.1.7New Mauritius Hotels
Average Figures of the Seven Companies
Companies
Dividend Date
Before the Dividend Date
After the Dividend Date
% Change in Price
Mauritius Commercial Bank
06-Jul-10
140.75
138.81
1.38%
State Bank OF Mauritius
13-Sep-10
85.83
86.95
-1.30%
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New Mauritius Hotels Ltd
08-Oct-10
102.18
109.1
-6.77%
Harel Frres Ltd
08-Dec-10
38.3
38.18
0.31%
Rogers and Co Ltd
29-Sep-10
269
268.9
0.04%
Sun Resorts
01-Mar-10
66.15
65.06
1.65%
Ireland Blyth
12-Jul-10
57.3
61
-6.46%
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6 Interpretation
Normally there are fifteen days gaps or less depending on the date set
Before = Share price @Dividend Date less Share price before dividend
After=Share price @Dividend dateShare Price after Dividend Date
*Figures I have used are the first date for the dividend before and for dividend after its the
figures with the last date.
Tendency of price before and after Dividend Date
Company
The Mauritius Commercial Bank Ltd
State Bank of Mauritius Ltd
New Mauritius Hotels Ltd
Harel Freres Ltd
Rogers & Co. Ltd
Sun Resorts Ltd
Ireland Blyth Ltd
Before
2
-1
3
0
13
-5.5
4
After
2
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2
-7
0
3
-3
-2
Figure 5.1.1- we can see different trends for Mauritius Commercial Bank the average price are
constant before and after the dividend date .Mcb is considered to be the largest bank in
Mauritius yet before the dividend date there was different trends that was noted on the curve.
On 21 June 2010 the price was low but then it increased up till the next day of dividend date
where it makes a downward shift.
5.1.2 it began with a negative price but after the dividend date the price shift to a positive
one.Sbm began with a rise in price on the first date before the dividend date then it make no
movements where it remain constant but soon after the dividend date it makes different shifts
where the price at one time it increased or even fell down.
5.1.3-Before the dividend date the price was on average very high but after the dividend date
we can see a tremendous downward shift .We can see before the dividend date the price make
great progress beginning from 260 increased p to 273 but after the dividend date the price slows
down and make a downward pattern .
5.1.4-It began with negative figures but after the dividend date the price changes to a positive
one. Before the dividend date the price continuing on making a downward trend but soon after
the dividend date the price remain constant for one day then it make a upward trend up but still
the price didnt exceed the amount it was on 15 February 2010.
5.1.5 The figures was a positive one before the dividend date but after the dividend date the
average figures was a negative one .Before the dividend date again we can noticed how the
price gradually increased at low steps but from 07 July 2010 it make a good upward trend ,soonafter the dividend date the price continue on the same trends but this time it increased at high
speed.
5.1.6 Its quite a different pattern for Harel Frres. Before and after the dividend date the price
was on average 0.HF till the first date before the dividend the price as such didnt make a good
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trend ,the price remain constantly between 38 and 38.5 ,but after nine days after dividend date
the price make a downward pattern.
5.1.7For it still began with positive figures but after the dividend date the price ends with
negative figures, NMH prices didnt increase much up to the first date before dividend date but
after the dividend date the price made a tremendous upward trend 111.As we can see 16 days
before the price was at 101.
7 Conclusion
We all know that Mauritius is an emerging market with its stock Exchange established less than
ten years ago. We have carried out a statistical analysis of past data compiling as from the final
dividend paid for the year 2010. The data was from the seven top companies listed on stock
market and it was taken based on their biggest market capitalisation. We have seen for the
different how the price changes drastically in some leading to a great fall and to others to agreat rise. There are some characteristics which are unique to Mauritius for example low
distribution in the ownership of shares which are responsible for a certain clientele effect that
could explained the difference in price shift in the market.
7.1-Recommendations for Further Study
Fact book 2010
History on Official Market of SEM.
History of Sbm Securities
8-Reference
Purmessur R.D;Boodhoo R.(2009) Signalling Power of Dividend on firms future Profits,
International Interdisciplinary Journey
Seppo .KDividend Puzzle, A review of Dividend Theories.
Merton H;Miller.K.R(1985)Dividend Policy under Assymetric Information,The Journal of
Finance ,Vol. 40,No.4.(Sep 1985),PP.1031-1051
Goliath Business Knowledge on Demand, Journal of International Finance and Economic, Jan
2007
Husam et al:Dividend Policy Areview of Theroies and Empirical Evidence,International Bulletin
of Business Administration ,2010
Stock Exchange of Mauritius
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Economy Watch , Economy ,Investment and Finance Reports
Ohlson et al.2005 Dividend Policy Irrelevancy and the Construction of Earnings.
Azzopardi Franco(2004)Dividend Irrelevance and the Clientele Effect
Dalais.C (2009)Annual Report of Sun Resorts
Chukwuogor.C(2007) Stock Market Returns and Volatilities :A Global Comparison
Appendix
quoteDate1
companyCode
company
todayCPrice
DPS
23.11.2010
HARF.N0000
Harel Freres Ltd
38.5
0.7
24.11.2010
HARF.N0000
Harel Freres Ltd
38.5
0.7
25.11.2010
HARF.N0000
Harel Freres Ltd
38.5
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0.7
26.11.2010
HARF.N0000
Harel Freres Ltd
38.5
0.7
29.11.2010
HARF.N0000
Harel Freres Ltd
38
0.7
30.11.2010
HARF.N0000
Harel Freres Ltd
38.1
0.7
01.12.2010
HARF.N0000
Harel Freres Ltd
38
0.7
02.12.2010
HARF.N0000
Harel Freres Ltd
38
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0.7
03.12.2010
HARF.N0000
Harel Freres Ltd
38.5
0.7
06.12.2010
HARF.N0000
Harel Freres Ltd
38
0.7
07.12.2010
HARF.N0000
Harel Freres Ltd
38.7
0.7
08.12.2010
HARF.N0000
Harel Freres Ltd
38.50.7
09.12.2010
HARF.N0000
Harel Freres Ltd
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37.8
0.7
10.12.2010
HARF.N0000
Harel Freres Ltd
38.3
0.7
13.12.2010
HARF.N0000
Harel Freres Ltd
38.3
0.7
14.12.2010
HARF.N0000
Harel Freres Ltd
38.5
0.7
15.12.2010
HARF.N0000
Harel Freres Ltd
38.5
0.7
16.12.2010
HARF.N0000
Harel Freres Ltd
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38.6
0.7
17.12.2010
HARF.N0000
Harel Freres Ltd
38
0.7
20.12.2010
HARF.N0000
Harel Freres Ltd
38
0.7
21.12.2010
HARF.N0000
Harel Freres Ltd
37
0.7
22.12.2010
HARF.N0000
Harel Freres Ltd
38.5
0.7
23.12.2010
HARF.N0000
Harel Freres
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38.5
0.7
Appendix
quoteDate1
companyCode
company
todayCPrice
DPS
21.06.2010
MCB.N0000
M C B
139
5.25
23.06.2010
MCB.N0000
M C B
141
5.25
24.06.2010
MCB.N0000
M C B
141
5.25
25.06.2010
MCB.N0000
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M C B
142
5.25
29.06.2010
MCB.N0000
M C B
142
5.25
30.06.2010
MCB.N0000
M C B
142
5.25
01.07.2010
MCB.N0000
M C B
141
5.25
02.07.2010
MCB.N0000
M C B
140
5.25
05.07.2010
MCB.N0000
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M C B
141
5.25
06.07.2010
MCB.N0000
M C B
141
5.25
07.07.2010
MCB.N0000
M C B
139
5.25
08.07.2010
MCB.N0000
M C B
138
5.25
09.07.2010
MCB.N0000
M C B
139
5.25
12.07.2010
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MCB.N0000
M C B
138
5.25
13.07.2010
MCB.N0000
M C B
139
5.25
14.07.2010
MCB.N0000
M C B
139
5.25
15.07.2010
MCB.N0000
M C B
140
5.25
16.07.2010
MCB.N0000
M C B
139
5.25
19.07.2010
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MCB.N0000
M C B
138
5.25
20.07.2010
MCB.N0000
M C B
139
5.25
21.07.2010
MCB.N0000
M C B
139
5.25
Appendix
quoteDate1
companyCode
company
todayCPrice
DPS
14.09.2010
ROGE.N0000
Rogers & Co. Ltd
260
9
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15.09.2010
ROGE.N0000
Rogers & Co. Ltd
264
9
16.09.2010
ROGE.N0000
Rogers & Co. Ltd
266
9
17.09.2010
ROGE.N0000
Rogers & Co. Ltd
266
9
20.09.2010
ROGE.N0000
Rogers & Co. Ltd
268
9
21.09.2010
ROGE.N0000
Rogers & Co. Ltd
268
9
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22.09.2010
ROGE.N0000
Rogers & Co. Ltd
273
9
23.09.2010
ROGE.N0000
Rogers & Co. Ltd
273
9
24.09.2010
ROGE.N0000
Rogers & Co. Ltd
273
9
27.09.2010
ROGE.N0000
Rogers & Co. Ltd
273
9
28.09.2010
ROGE.N0000
Rogers & Co. Ltd
275
9
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29.09.2010
ROGE.N0000
Rogers & Co. Ltd
273
12
30.09.2010
ROGE.N0000
Rogers & Co. Ltd
273
12
01.10.2010
ROGE.N0000
Rogers & Co. Ltd
273
12
04.10.2010
ROGE.N0000
Rogers & Co. Ltd
270
12
05.10.2010
ROGE.N0000
Rogers & Co. Ltd
270
12
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06.10.2010
ROGE.N0000
Rogers & Co. Ltd
267
12
07.10.2010
ROGE.N0000
Rogers & Co. Ltd
267
12
08.10.2010
ROGE.N0000
Rogers & Co. Ltd
267
12
11.10.2010
ROGE.N0000
Rogers & Co. Ltd
267
12
12.10.2010
ROGE.N0000
Rogers & Co. Ltd
267
12
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13.10.2010
ROGE.N0000
Rogers & Co. Ltd
267
12
14.10.2010
ROGE.N0000
Rogers & Co.
270
12
Appendix
quoteDate1
companyCode
company
todayCPrice
DPS
30.08.2010
SBM.N0000
State Bank of Mauritius Ltd
88
2.75
31.08.2010
SBM.N0000
State Bank of Mauritius Ltd
87
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2.75
01.09.2010
SBM.N0000
State Bank of Mauritius Ltd
86.5
2.75
02.09.2010
SBM.N0000
State Bank of Mauritius Ltd
85
2.75
03.09.2010
SBM.N0000
State Bank of Mauritius Ltd
85
2.75
06.09.2010
SBM.N0000
State Bank of Mauritius Ltd
85
2.75
07.09.2010
SBM.N0000
State Bank of Mauritius Ltd
85
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2.75
08.09.2010
SBM.N0000
State Bank of Mauritius Ltd
85
2.75
09.09.2010
SBM.N0000
State Bank of Mauritius Ltd
86
2.75
13.09.2010
SBM.N0000
State Bank of Mauritius Ltd
87
2.75
14.09.2010
SBM.N0000
State Bank of Mauritius Ltd
86
2.75
15.09.2010
SBM.N0000
State Bank of Mauritius Ltd
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87
2.75
16.09.2010
SBM.N0000
State Bank of Mauritius Ltd
87
2.75
17.09.2010
SBM.N0000
State Bank of Mauritius Ltd
88
2.75
20.09.2010
SBM.N0000
State Bank of Mauritius Ltd
88
2.75
21.09.2010
SBM.N0000
State Bank of Mauritius Ltd
88.5
2.75
22.09.2010
SBM.N0000
State Bank of Mauritius Ltd
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88
2.75
23.09.2010
SBM.N0000
State Bank of Mauritius Ltd
88
2.75
24.09.2010
SBM.N0000
State Bank of Mauritius Ltd
85.5
2.75
27.09.2010
SBM.N0000
State Bank of Mauritius Ltd
85.5
2.75
28.09.2010
SBM.N0000
State Bank of Mauritius Ltd
85
2.75
Appendix
quoteDate1
companyCode
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company
todayCPrice
DPS
28.06.2010
IBL.N0000
Ireland Blyth
55.5
1
29.06.2010
IBL.N0000
Ireland Blyth
56.5
1
30.06.2010
IBL.N0000
Ireland Blyth
57
1
01.07.2010
IBL.N0000
Ireland Blyth
56
1
02.07.2010
IBL.N0000
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Ireland Blyth
57
1
05.07.2010
IBL.N0000
Ireland Blyth
57
1
06.07.2010
IBL.N0000
Ireland Blyth
57.5
1
07.07.32010
IBL.N0000
Ireland Blyth
57.5
1
08.07.2010
IBL.N0000
Ireland Blyth
59
1
09.07.2010
IBL.N0000
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Ireland Blyth
60
1
12.07.2010
IBL.N0000
Ireland Blyth
59.5
1
13.07.2010
IBL.N0000
Ireland Blyth
60
0.6
14.07.2010
IBL.N0000
Ireland Blyth
60.5
0.6
15.07.2010
IBL.N0000
Ireland Blyth
60.5
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0.6
16.07.2010
IBL.N0000
Ireland Blyth
60.5
0.6
19.07.2010
IBL.N0000
Ireland Blyth
61
0.6
20.07.2010
IBL.N0000
Ireland Blyth
61.5
0.6
21.07.2010
IBL.N0000
Ireland Blyth
61.5
0.6
22.07.2010
IBL.N0000
Ireland Blyth
61
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0.6
23.07.2010
IBL.N0000
Ireland Blyth
61.5
0.6
26.07.2010
IBL.N0000
Ireland Blyth
61.5
0.6
27.07.2010
IBL.N0000
Ireland Blyth
61.5
0.6
Appendix
quoteDate1
companyCode
company
todayCPrice
DPS
15.02.2010
SUNRESORTS.0000
SUNRESORTS
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69.5
2.5
16.02.2010
SUNRESORTS.0000
SUNRESORTS
67
2.5
17.02.2010
SUNRESORTS.0000
SUNRESORTS
66
2.5
18.02.2010
SUNRESORTS.0000
SUNRESORTS
66
2.5
19.02.2010
SUNRESORTS.0000
SUNRESORTS
66
2.5
22.02.2010
SUNRESORTS.0000
SUNRESORTS
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SUNRESORTS
64
2.5
02.03.2010
SUNRESORTS.0000
SUNRESORTS
62
1.1
03.03.2010
SUNRESORTS.0000
SUNRESORTS
62
1.1
04.03.2010
SUNRESORTS.0000
SUNRESORTS
63.5
1.1
05.03.2010
SUNRESORTS.0000
SUNRESORTS
63.5
1.1
08.03.2010
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SUNRESORTS.0000
SUNRESORTS
64.5
1.1
09.03.2010
SUNRESORTS.0000
SUNRESORTS
66
1.1
10.03.2010
SUNRESORTS.0000
SUNRESORTS
69
1.1
11.03.2010
SUNRESORTS.0000
SUNRESORTS
68
1.1
15.03.2010
SUNRESORTS.0000
SUNRESORTS
67
1 1