The impact of the distribution of dividends and the repurchase of shares on the equity profitability of the companies in the american technology sector
DOI:
https://doi.org/10.29352/mill0221e.41915Keywords:
distribution of dividends; share repurchases; profitability; event study; technology sectorAbstract
Introduction: Given that this investigation includes four dividend distribution announcements per year, we were able to assess which of these announcements has the greatest impact on shareholder returns. Furthermore, this study compared those impacts with the ones coming from the share buyback programs.
Objective: Companies often adopt different strategic policies, namely distributing dividends and repurchasing their own shares, as a way to influence their performance.
Methods: Using a sample of 30 technology companies listed on the NASDAQ stock exchange, for the period of 2018 – 2022, and applying the “event study” methodology, we sought to assess the impact of dividend distribution announcements and share buyback program announcements on stock return to determine which type of shareholder remuneration has the most significant impact.
Results: Our results show that share buyback program announcements have the most significant impact on shareholder profitability, as they generate higher abnormal market returns. Furthermore, share buyback announcements are more sensitive to periods of crisis compared to dividend distribution announcements. Regarding the dividend distribution policy, the first and fourth announcements were found to have the strongest influence on shareholder returns.
Conclusion: The study finds that share buyback announcements have a stronger impact on shareholder returns than dividend announcements, especially during crisis periods like the pandemic. Among dividend announcements, the first and fourth of the year have the most influence on stock performance. Overall, buybacks emerge as the most impactful form of shareholder remuneration in the U.S. tech sector.
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