IndexResearch Problem, Research Questions and ObjectivesLimitations of the StudyLiterature ReviewThe purpose of this study is to investigate the impact of dividend announcement on stock prices of listed manufacturing companies in Sri Lanka and for the period from 2013 to 2017. The data collected for this study covered 10 companies listed manufacturing companies in Sri Lanka as a sample for this study. Event study methodology is used to analyze stock price reaction to dividend announcements. Event study methodology and regression analysis are used to analyze the collected data. This study examines the impact of dividend announcements on stock prices by evaluating stock returns such as actual stock return, expected stock return and abnormal return on selected listed manufacturing companies in the CSE (Colombo Stock Exchange). This study produces important details for investors and other stakeholders. This information will support the development of the stock market and economy. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get Original EssayKeywords: Abnormal Return, Dividend Announcement, Event Study, Stock PricesThis study focuses on dividend announcements and their impact on stock prices in the Sri Lanka stock market. In the context of Sri Lanka, it is very important to investigate the impact of dividend announcement on stock prices. Investors involved in buying stocks fundamentally consider factors such as stock prices, risk, company dividends, leverages, profitability and other factors. The price of the shares is granted as the price of sellers and buyers is agreed upon. In general, stock prices change frequently. There are several reasons that affect the change in stock prices, such as dividend announcements, bonus issue, rights issue etc. Not only this, but also the economic stability of the country, political situations, the internal situation of companies etc. There is a lot of research we are investigating on the idea that the factors mentioned above impact the stock price. Therefore, dividend announcement is one of the key elements that can influence investors' decision-making process. According to Linter (1956), investors' response to dividend announcements. Explain that there is a relationship between dividend policy and shareholder wealth. Companies issue shares to raise investor funds with the aim of financing and increasing corporate wealth. Dividends are the return on shares. When companies listed on the CSE decide to pay dividends to shareholders. They announce it to the public as corporate announcements. There are two ways to pay dividends: the interim dividend and the final dividend. Annual dividend payment times differ from company to company. However, every single company listed on the CSE announces its dividend payments to the public as if they were company announcements. Companies expect to increase the market value of the firm through dividend announcements. Brown, Finn, and Hancock (1977, hereafter BFH) found that dividend announcements have an informational effect on stock prices. In CSE, stock price is the main factor, it plays a vital role. These studies aim to identify the impact of dividend announcement on stock price in Colombo Stock Exchange in the dynamic context of Sri Lanka. According to the circumstance of Sri Lanka, it is very usefulstudy the impact of dividend announcement on stock price. Because investors interested in trading stocks basically study significant factors. (Velnampy, Nimalthasan, & Kalaiaras, 2014) highlights that dividend policy affects corporate performance. Therefore, dividend announcement is one of the significant factors that can influence investors' expectations. Previous studies provide questionable ideas about the relationship between dividend announcements and stock price. “The most debated issue in the financial sector concerns the effect of dividend policy on the market price of shares”. (Md. Abdulla Al Hasan, Md Asaduzzaman, Rashed Al Karim, 2013) and most of the previous studies related to this topic were conducted based on the stock markets of Western countries. Michaely et al. (1995) explore announcements of 561 dividend distributions and 887 dividend omissions by US public companies over the period 1964–1988. Furthermore, only a few studies have been conducted on stock price dividend announcement related to the Sri Lankan context. In the context of the Sri Lankan stock market, Bandara (2001) investigated dividend announcement. He found that the market reacted positively to the announcement of a dividend increase and reacted negatively to the announcement of a dividend decrease. “Dividend announcement is usually regarded as a positive signal to shareholders and its positive impact on stock price” (Mehndiratta & Gupta, 2010). These results are very useful for investors, listed companies and those who pay attention to stock market behavior. Helps you make successful investment decisions. The dividend policy will not influence the market value of the firm (Black & Scholes, 1974; Conroy, Eades, & Harris, 2000). This means that the market share price does not respond to the dividend announcement and also according to Miller and Modigliani (1961), they argue that there is no relationship between the firm's dividend policy and shareholder wealth. Other studies have also not validated these two findings. But there is still a problem regarding the previous results. Therefore, it is essential to carry out further studies on dividend announcements and stock prices. Research problem, research questions and objectives Dividend announcement affects investors' decision. When making decisions, investors encounter difficulties. Therefore, this study investigates the effect of dividend announcement on stock price. Existing literature provides conflicting ideas on the relationship between dividend announcements in the Sri Lankan context. In foreign context, there are different results found in different studies regarding dividend announcements and stock prices. And there are some questionable results too. “The most debated issue in the field of finance concerns the effect of dividend policy on the market price of shares”. (Md. Abdulla Al Hasan, Md Asaduzzaman, Rashed Al Karim, 2013). Furthermore, only a limited amount of research has been conducted regarding dividend announcements on stock prices. related to the Sri Lanka Stock Exchange. Therefore, this research investigates the impact of dividend announcement on stock prices. This research was conducted in different countries, and the culture, business environment and government policies were different. Furthermore, different business sectors relied on such research, and the research results were completely different. Therefore the findings of this research cannot be applied to the Sri Lankan context as it is and it is difficult to evaluate the effect of financial leverage on business growth of manufacturing companies in the Stock ExchangeColombo (CSE) based on knowledge from previous research. The purpose of this study is to fill this knowledge gap. This research seeks to answer the following sub questions: Does dividend announcement have an impact on stock price?a) To identify the nature of dividend announcement in listed manufacturing companies in Sri Lanka.b) To analyze the relationship between the dividend announcement and share price in listed manufacturing companies in Sri Lanka. Importance of the studies. This study aims to identify whether the impact of dividend announcement on stock price.a) Investor can identify what are the effects of dividend announcement on investment decision.b) This research will help investors and many people are interested in studying in this field. Therefore, this study will help fill the research gaps on this topic of the Srilnka stock market. c) CSE is the only stock market in Srilnka.Therefore, every transaction directly affects the economic development of the country. Therefore, it is important to further investigate the factors that can influence the stock price to determine economic development. Limitations of the Studya) The study is limited to 10 listed manufacturing companies in Sri Lanka. So it is not possible to consider all manufacturing companies in Srilnka.b) This study only examines dividend announcement. However, there may be many other factors that influence the stock price.c) In this study, the time period considered as the test period is not enough.d) The accuracy of the information depends on the CSE data.Literature reviewThe study of The effect of dividend announcement on stock price with reference to manufacturing companies listed in the CSE is carried out in a context where there is a lot of previous research related to dividend policy and stock price. There is a strong relationship between dividend announcements and stock prices. But some argue that there is no relationship between dividend announcements and stock prices. However, there is still no single opinion on this topic. According to previous studies related to foreign stock markets, it was found that there is a certain relationship between dividend announcements and stock prices. They found that there is a positive relationship between dividend announcements and stock prices. Numerous prior studies suggest that a company's announcement of a dividend increase sends a positive signal about the company's future, thereby significantly increasing the company's stock price. Likewise, the positive signal implies that the company now attracts a new generation of investors, thus increasing demand for the company's shares. (Laabs Douglas, S and Bacon Frank, W, 2013) Subsequently, Asquith and Mullins (1983) conducted a study on the market response to initial and subsequent dividend announcements in the US market; the study analyzed a sample of 168 companies that distribute dividends to shareholders. They found large and significantly positive two-day abnormal returns (the average abnormal return increased by (3.7%) in response to dividend initiation announcements. Furthermore, they found that the average market response to initiation was greater than The average effect of the subsequent large dividend increases analyzed here. The results of this study also support the semi-strong-form efficient market hypothesis. Brickley (1983) tested a sample of 165 specially designated dividend announcements of traded stocks on US stock markets covering the year 1969. to 1979. He found that 2.1% of the average positive abnormal returns are due to specially designated dividend announcements in the marketAmerican. In a subsequent study, Scott and Keith (1996) examined the differential stock price reaction to dividend increase and decrease announcements compared to bull and bear markets. They found that market phase had a significant impact on abnormal returns around the announcement, and it appeared that more information was conveyed by dividend change announcements that ran counter to market phase. Finally, they concluded that these results were consistent with the information content of the dividend hypothesis. Miller and Modigliani (1961), first, studied the impact of dividend policy on firm value. Their study shows that, under certain limited conditions, the firm's dividend policy has no effect on the value of its shares. Research conducted by Gurgul, Majdosz, and Mestel (2006) focused on analyzing the impact of changing dividend announcement on stock price and change in turnover in Germany. capital market. The positive and negative change in dividends had a statistically significant influence on the price change in the same direction as the announcement. Dividend increase announcements are received positively by investors, while there is some evidence to suggest that investors react negatively before dividend decrease announcements (Jais, Karim, Funaoka, & Abidin, 2009). The bird in the hand theory has received the most support (Naser, Nuseibeh & Rashed, 2013). According to (Lonie, Abeyratna, Power, & Sinclair, 1996) we found that current earnings were the dominant signal for the capital market and that dividend announcement was partial and often inferior and substitute signaling mechanism that allows managers to convey to investors their opinions on the future performance of the company. According to previous studies regarding stock prices and company announcements, there is a strong relationship between dividend announcements and stock prices. We consider CATV for a period of short-term events instead of AR as a dependent variable and analyze: (1) which changes have a greater impact on investor behavior; and (2) whether the announcement conveys new information to investors which, in turn, influences their trading. In other words, we examine whether investors react based on their interpretations of the announcements. Our results show that dividend news contains information, while the change in earnings does not provide explanatory power to the change in television reaction to the announcement. From our findings we recommend that policymakers use trading volume alongside stock price to reflect investor behavior. (Felimban, Floros and Nguyen, 2018) The market reaction is greater the greater the change in the dividend. There is no significant difference in our results using a model of dividend expectations based on analyst forecasts, and our results are robust to possible confounding effects when dividend and earnings announcements occur close together. (Pettit, 1972) In the context of the Sri Lankan capital market, Bandara (2001) studied the information content of dividend announcements with a sample of 123 events relating to 37 companies, from 1993 to 1998, using the Standard Event Study methodology in Colombo Stock Exchange (CSE). He found that the market reacted positively to the announcement of a dividend increase and negatively to the announcement of a dividend decrease. For constant announcements, no significant reaction was shown in the CSE. Considering the above literature reviews.