MARKET REACTIONS ON DIVIDEND ANNOUNCEMENT PRE AND DURING THE COVID 19 BY USING EVENT STUDY METHODOLOGY: A CASE OF MARUTI SUZUKI INDIA LTD

Dividend signaling theory states that dividend announcement plays a vital role as it provides signals to investors regarding the future performance of the company on the basis of changes in stock price. This study attempts to analyses the market reactions on dividend announcement of Maruti Suzuki India Ltd which is listed in National Stock Exchange (NSE) India; for pre (FY 2019) and during the COVID 19 (FY 2020) by using event study methodology. The event study methodology is useful to analyze the impact of an event on the company's stock price. The market of share of Maruti Suzuki India Ltd. is 50.59% (highest market share in India) in year 2020. This study includes window estimation period of 220 days and further this study investigates stock price reactions to stock dividend announcements, 20 days before and after the announcement dates. Data of company's stock price has been collected from the official website of NSE. During FY 2019, the market showed positive trend as the cumulative average return (CAR) for the year were reported positive but in FY 2020, it was found that CARs were reported negative returns mainly due to lockdown along with the effect of pandemic on the stock market. Furthermore, during the COVID 19, dividend announcement has not created any strong reason to invest in the company whereas it was quite satisfactory for the investors during FY 2019. The company was not in the position to announce the satisfactory dividend because of the market condition and downfall in demand. The rationale of this study is to analyze the impact of severe lockdown and dividend announcement on the stock price of the Maruti Suzuki India Ltd. This study will be helpful for those who invest in Indian automobile company and want to understand the role of event in stock performance.