Impact of Announcing Dividends on Shares Prices of Corporations Listed Dissertation

Impact of Announcing Dividends on Shares Prices of Corporations Listed in the Dubai Financial Market - Dissertation Example 1.2 Name and role of the researcher 1.3 Summary With the development of trade and business, the face of the financial markets has changed completely. Regulatory authorities of different countries have realized the increasing importance of business for economic developments. In this process, they strive to encourage the business environment through various means. In order to encourage industrialization within a country, a huge amount of investments is required. However, it is not always possible for the government to provide the entire capital for developing growth oriented economic structure. In this process, multiple financial markets play a very crucial role in shaping an economy. The primary objective of financial markets is to avail necessary capital for industrial development from different sources. Therefore, financial markets act a mediator that transforms the ideal and potential capital for productive purposes. Besley and Brigham have explained that the financial market helps to â€Å"facilitate flow of fund† from different sources, and in case of developed countries, â€Å"financial markets help efficiently allocate excess funds of savers to individuals and organisation in need of funds for investment or consumption† (Besley and Brigham, 2007, p.89). ... Among these, the financial market is the most prominent in terms of generating funds for public listed companies. The capital market helps to raise long term funds from different retail or institutional investors and the entire mechanism is technically processed though the stock exchanges. The capital markets deal in two sub markets i.e. stock market and bond market (CBL Economic Review, 2009). The investments transaction process between the investors and companies are done by the stock exchange and the stock prices are generally determined automatically based on the prevailing demand and supply. However, the stock prices remain for short run as demand and supply of stock is uncertain and tends to change every now and then (Gray, Cusatis and Woolridge, 2003, p.31). However, there are also other factors that influence the demand and supply of a stock. Basically, multiple internal factors like company performance, dividend, competition etc and external factors like inflation, market st ructure, economic cycle etc are responsible for influencing demand and supply (Khan and Zuberi, 1999, p.47). This research paper will attempt to analyse the role of dividend announcement influencing a stock price while focusing on the companies listed in the Dubai Financial market. Dividend is one of the internal factors that influence stock prices. In fact, when the managements of public listed companies announce the issue of dividends, the stock prices are influenced and there are other changes which can also be traced in relation to the stock. Dividend is â€Å"any distribution made by a company to its shareholders whether in money or other property† (CCH Editors, 2009, p.119).