Changes in dividend convey information about the earnings of the announcing firm which in turn affect the price. Security price depends on current earnings, past earnings, and future prospect of earnings. Dividend relevant theory postulates that dividend policy, dividend initiation and changes in dividend carry information about the market value of the announcing  firms. Accordingly, an unexpected increase in dividends conveys positive information about the future profitability of the firm and vice versa. Firm’s management is better informed than the market about the future prospects of their firm and therefore, their action relating to any financing decision conveys information to the investors. The principal purpose of this study was to examine the intra-industry information effects of announcements of dividend initiations of the firms associated with Dhaka Stock Exchange (DSE). To test this hypothesis, we used Herfindahl Index and Tobin’s q ratio. The study found that the intra-industry effects of dividend revisions are apparent.

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According to the efficient market hypothesis, publicly available information is accessible to all investors at zero cost. Therefore, the security prices might adjust to information as soon as it becomes publicly available. The purpose of the study is to investigate the impact of the announcements of dividends on the price of the stock listed with Dhaka Stock Exchange ( DSE). Stock market reactions to dividend announcements introduced the concept of event time, which may well have been the single most important breakthrough in our understanding of how stock prices respond to financing information. The present study is entirely an analytical presentation concentrating on corporate dividends over time which attempts to analyse different theoretical models in explaining the impact of dividend on stock price of the firms on DSE. The findings suggest that there exists announcement impact of dividend on stock price. The most significant price changes occurred in the days prior to the announcement date.