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<p>This paper examines the relation between dividend payments and stock prices of all firms in the German prime standard DAX 30 in the time period from 2012 to 2019. The irrelevance theory introduced by Miller and Modigliani states that dividend payments must not have an impact on stock prices in a perfect market. In contrast, the signaling theory and the dividend puzzle indicate that dividend payments are likely to have a profound impact on the stock price. According to our findings the ex-dividend decrease of stock prices was significantly smaller than the dividend payment. Nevertheless, the results support the impact of the dividend payment on the share price. Firstly, the existence of the ex-dividend markdown is a proof that dividend payments cause share price losses. Secondly, the study explains in particular that high dividend payments result in high share prices over the examined period. Thirdly, our analysis demonstrates a positive correlation between the dividend and the stock price development according to the signaling theory. Considering the above- mentioned results, we can conclude that the share price of a company is highly affected by the decision making of the company regarding the dividend policy.</p>
</abstract>

This paper examines the relation between dividend payments and stock prices of all firms in the German prime standard DAX 30 in the time period from 2012 to 2019. The irrelevance theory introduced by Miller and Modigliani states that dividend payments must not have an impact on stock prices in a perfect market. In contrast, the signaling theory and the dividend puzzle indicate that dividend payments are likely to have a profound impact on the stock price. According to our findings the ex-dividend decrease of stock prices was significantly smaller than the dividend payment. Nevertheless, the results support the impact of the dividend payment on the share price. Firstly, the existence of the ex-dividend markdown is a proof that dividend payments cause share price losses. Secondly, the study explains in particular that high dividend payments result in high share prices over the examined period. Thirdly, our analysis demonstrates a positive correlation between the dividend and the stock price development according to the signaling theory. Considering the above- mentioned results, we can conclude that the share price of a company is highly affected by the decision making of the company regarding the dividend policy.

On the Impact of Dividend Payments on Stock Prices - an Empirical Analysis of the German Stock Market

Studies in Business and Economics

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

This paper examines the relation between dividend payments and stock prices of all firms in the German prime standard DAX 30 in the time period from 2012 to...

On the Impact of Dividend Payments on Stock Prices - an Empirical Analysis of the German Stock Market

Published Online: May 26, 2021

Page range: 255 - 269

DOI: https://doi.org/10.2478/sbe-2021-0020

Keywords
Payout Policy, Dividend Payments, Stock Price, Market Efficiency

© 2021 Konstantin Melching et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

On the Impact of Dividend Payments on Stock Prices - an Empirical Analysis of the German Stock Market

Published Online: May 26, 2021

Page range: 255 - 269

DOI: https://doi.org/10.2478/sbe-2021-0020

KeywordsPayout Policy, Dividend Payments, Stock Price, Market Efficiency

© 2021 Konstantin Melching et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Keywords
Payout Policy, Dividend Payments, Stock Price, Market Efficiency