1. Impact of Dividend on the Stock
Price – A Study of Selected
Indian Private Sector Banks
By
Asit Gope
Research Scholar, Department of Commerce, University of Kalyani
Email: rajagopeasit@yahoo.co.in
asii.akg@rediffmail.com

2. Objective of the Study:
The main objective of the study is to analyse
the relationship between the dividend
declaration and stock prices of the selected
Indian private sector banks;
 The other objective is to evaluate the impact
of the dividend declaration on the stock prices
of the concerned banking companies;

3. Research Design and Methodology :
The author have selected top five private
sector banks in Indian economy based on the
criteria of their market capitalisations over the
years. The private sector banks under the
study are ICICI Bank Ltd, HDFC Bank Ltd, AXIS
Bank Ltd, Kotak Mahindra Bank Ltd and
Indusind Bank Ltd.
Period under the study is 2009-2013

4. In order to make a comparative study of data
pertaining to the banks:
15 day’s average stock value before the declaration of dividend
and 15 day’s average stock value after the declaration of
dividend for the year from 2009 to 2013 have been calculated;
Moving average of 3 years has been calculated for the average
stock price per year taking as the average of high and low value
of stock price per year from 2009 to 2013;
Paired Correlation and Paired sample t-test has been used to
show the mean differences between the stock prices before and
after the date of declaration of dividend by the banking
companies from 2009 to 2013;

5. Data Collection and Statistical Tools:
Data have been collected from the premier
stock exchanges of India, namely, Bombay
Stock Exchange (BSE), National Stock
Exchanges (NSE) and also from the web sites
of the respective banks;
Statistical software IBM SPSS has been used to
run all the statistical test;

6. Table-1: Trends showing Stock Price Movements of Selected Banks During 2009 to 2013
Name of the Bank Year 15 Day's Average Stock
Price before Dividend
Declaration
15 Day's Average Stock
Price after Dividend
Declaration
Increase
or Decrease
ICICI Bank Ltd. 2009 400 569.54 169.54
2010 955.49 919.2 -36.29
2011 1106.71 1064.77 -41.94
2012 865.56 830.09 -35.47
2013 1062.63 1166.29 103.66
HDFC Bank Ltd. 2009 1043.47 1166.63 123.16
2010 1940.6 1945.85 5.25
2011 2331.27 2312.86 -18.41
2012 525.15 540.29 15.14
2013 641.08 691.91 50.83
AXIS Bank Ltd. 2009 437.2 578.08 140.88
2010 1169.86 1249.05 79.19
2011 1427.07 1269.33 -157.74
2012 1159.38 1013.48 -145.9
2013 1304.25 1483.42 179.17
KOTAK MAHINDRA Bank Ltd. 2009 407.17 623.9 216.73
2010 740.18 755.94 15.76
2011 444.1 417.54 -26.56
2012 579.8 546.11 -33.69
2013 664.89 745.29 80.4
INDUSIND Bank Ltd 2009 41.43 49.45 8.02
2010 176.84 188.96 12.12
2011 269.46 258.19 -11.27
2012 327.42 325.58 -1.84
2013 405.54 478.93 73.39

7. Analysis:
• It can be observed:
– Not all the stock prices are increased with respect
to the dividend declaration;
– The ‘Increase or Decrease’ column shows a mix
reaction in the stock market;
– Stocks such as Axis Bank Ltd, HDFC Banks Ltd,
Kotak Mahindra Banks Ltd and Indusind Bank Ltd
have recorded positive (i.e. increase) movements
in their respective stocks in at least 3 out 5 years
span;

8. Table-2: Stock Price Moving Average Movements of the Selected Banks during 2009 to 2013
Name of the Bank Year Average Stock Price 3 Years Moving Average
ICICI Bank Ltd. 2009 618.225 -
2010 1025.000 847.575
2011 899.500 948.850
2012 922.050 939.800
2013 997.850 -
HDFC Bank Ltd. 2009 1305.000 -
2010 2034.000 1610.158333
2011 1491.475 1362.550000
2012 562.175 893.7166667
2013 627.500 -
AXIS Bank Ltd. 2009 670.700 -
2010 1287.575 1030.016667
2011 1131.775 1166.700000
2012 1080.750 1123.008333
2013 1156.500 -
Kotak Mahindra Bank Ltd. 2009 528.925 -
2010 656.000 536.3333333
2011 424.075 542.5583333
2012 547.600 555.8916667
2013 696.000 -
INDUSIND Bank Ltd 2009 87.675 -
2010 222.525 182.2333333
2011 236.500 262.6333333
2012 328.875 329.8916667
2013 424.300 -

9. Analysis:
• The increasing trend can be observed in the
stock price movements of Kotak Mahindra Ltd
and Indusind Bank Ltd. HDFC is the only bank
for which a decreasing trend has been
observed;
• The other banks (i.e. Axis and ICICI) showed
mix trends in the stock value viz. first increase
and then decrease.

10. Impact of Dividend on the Stock Price:
The following hypotheses have been assumed:
 H0: There is no correlation between the dividend
declaration and stock price;
 H1: There exists correlation between the dividend
declaration and stock price;
 H2: There exists an impact of the dividend
declaration on the stock price;

11. The summary of the results:
Name of the
Bank
Correlation
between 15
Day’s average
stock price
before and after
dividend
declaration
Mean Value of the Stock Prices Mean
Differences
Paired
t-significance
(2-tailed)
(P-Value)
(at 95%
confidence
level)
15 Day’s
average stock
price before
dividend
declaration
15 Day’s
average stock
price after
dividend
declaration
ICICI
Bank
.947 878.0780 909.9780 31.90000 .509
HDFC
Bank
.998 1296.3140 1331.5080 35.19400 .227
AXIS
Bank
.910 1099.5520 1118.6720 19.12000 .803
Kotak
Mahindra Bank
.734 567.2280 617.7560 50.52800 .336
Indusind
Bank
.983 244.1380 260.2220 16.08400 .341

12. Findings:
Correlation results give positive values for all the
banks i.e. we can relate dividend with the stock
price
 null hypothesis (H0) is rejected and first alternative hypothesis
(H1) is accepted;
 Mean differences stock values are all positive (i.e. Stock Price
increases for all the banks under this study);
 There exists correlation between dividend declaration and the
stock price;

13. Findings Continues:
Significance value of t or P-value
All the P-values are higher than the alpha
(i.e. P>0.05) or (P>0.025 if 2-tailed);
Reject the second alternative hypothesis (H2);
The impact of dividend on the stock price is not
statistically significant;

14. Conclusion:
• The summary of the findings of this paper states that
since there is a relation between the dividend and
stock prices as correlation exists between them as
well as positive mean differences of the stock values
there might be some impact of dividend on the stock
price.
• It can also be mentioned that there are many factors
that are responsible for the stock price movements
and dividend is one of such factor but under this
study, it is not so statistically significant.

15. Thank You