Changes in high dividend stock yields before and after dividend announcement: Evidence from the IDX High Dividend 20 Index

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Abstract

This study examines changes in stock yields in the Indonesia Stock Exchange (IDX) High Dividend 20 Index in Indonesia before and after the dividend announcement. The purpose of this study is to analyze the impact of dividend announcements on market reactions and stock yields. The methodology used is an event study method, focusing on abnormal returns (AR) and cumulative abnormal returns (CAR) over 10 days before and after the dividend announcement. Data is collected from companies listed in the index, and analysis is carried out using the capital asset pricing model (CAPM) model to calculate expected returns. Key findings suggest that dividend announcements have a significant positive impact on stock prices, with companies that distribute higher dividends likely to get a more positive market reaction. The conclusion of this study confirms that the dividend announcement serves as a positive signal for investors regarding the company’s financial health, as well as providing valuable insights for investors and analysts in making investment decisions in the Indonesian stock market. The study also suggests the need to pay attention to market dynamics that affect the reaction to dividend announcements.

Keywords: Stock Yield, Dividend Announcement, IDX High Dividend 20 Index, Indonesia Stock Market, Market Reaction, High Dividend

Authors’ individual contribution: Conceptualization — I.M.Sui. and I.M.B.D.S.; Methodology — I.M.Sui. and I.M.B.D.S.; Software — K.S.W., I.N.S., and I.M.Sud.; Validation — I.M.Sui. and M.M.; Formal Analysis — K.S.W. and I.M.Sud.; Investigation — I.M.Sui., I.M.B.D.S., and K.S.W.; Resources — I.M.B.D.S., I.N.S., and I.M.Sud.; Data Curation — I.M.B.D.S. and I.M.Sud.; Writing — I.M.Sui., I.M.B.D.S., and M.M.; Visualization — I.M.B.D.S. and I.M.Sud.; Supervision — I.M.Sui. and M.M.; Project Administration — M.M. and K.S.W.; Funding Acquisition — I.M.Sui., M.M., I.M.B.D.S., K.S.W., and I.M.Sud.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G11, G14, G15, G17

Received: 08.06.2024
Revised: 13.10.2024; 09.11.2024; 04.03.2025
Accepted: 10.04.2025
Published online: 14.04.2025

How to cite this paper: Suidarma, I. M., Marjohan, M., Shankar, I. M. B. D., Widiantari, K. S., Sunarta, I. N., & Sudiksa, I. M. (2025). Changes in high dividend stock yields before and after dividend announcement: Evidence from the IDX High Dividend 20 Index. Risk Governance & Control: Financial Markets & Institutions, 15(2), 8–18. https://doi.org/10.22495/rgcv15i2p1