Stock Price Response to Dividend Announcements: Evidence from the Mongolian Stock Market

This paper examines dividend announcement reaction to stock prices using data on theMongolian Stock Exchange during from 2010 to 2013. Using the event study method, a sampleof 14 companies which had announced constantly their dividends during sample years listed onthe exchange of Mongolia is tested. And an essential hypothesis was stated that an average ofthe abnormal returns of the dividend announcement day, 50 days before the announcement, and50 days after announcement is not equal to zero. The result shows that however the dividendsannouncement information reacted early to stock prices from our selected date which was chosen50 days before and after the announcement, we don’t find significant abnormal stock returnsaround the dividend announcement and the hypothesis has not proved. It means that dividendsannouncement doesn’t significantly effect on stock price. The continual downward drift of thecumulative abnormal returns is inconsistent with the efficient market hypothesis, thereforeassumes that the Mongolian stock market does not efficiently adjust to dividends information forthe sample firms within the study period.