How does the Norwegian stock market react to unexpected dividend announcements?

Abstract

This study investigates the dividend signaling hypothesis by examining stock price reactions to unexpected dividend announcements on the Oslo Stock Exchange (OSE). While previous research relies on the market model, this study contributes to existing empirical research by focusing on the Fama-French three-factor model. A regression is also conducted to investigate if external factors (dividend yield, change in dividend yield, return on assets, Tobin`s Q and size), could explain the market reactions. The results indicate that OSE responds significantly to unexpected dividend announcements. However, external factors contribute to the market reactions. The results are considered as significant and robust. The evidence in this study presents support for the dividend signaling hypothesis in Norway, but no stronger than previous research conducted in the U.S.