DO DIVIDEND FLOWS AFFECT STOCK RETURNS?

We examine price impacts from dividend flows. Event-study estimates show that stocks experience abnormal returns on the dividend distribution day. Results also show a spillover effect to non-dividend-paying stocks that are likely to be part of the same benchmark portfolio as the dividend-paying stocks. Regression results indicate that the effect is dependent on the ownership share by professional investors. The temporary nature of the effect on returns is in line with the literature's demand-driven price pressure hypothesis.