The Impact of Regularly Dividend Announcements to Future Unexpected Earnings

Abstract

Nur Alam, A Destyanto (2005). The Impact of Regularly dividend announcements to Future Unexpected Earnings, Yogyakarta. International Program, Faculty of Economics, Islamic University of Indonesia. The previous researches about dividend content information that are worth for market are still in dispute. Several researches such as Natts (1973, 1976), Ang (1975), Gonedes (1978), and Dedi Hendriansah, Januardi M. Diah, Arianto, and Tashadi Tarmizi (2002) didn't invent evidence that dividend contains information. A recent research conducted by Aharony and Swary (1980), Woolridge (1982), Asquith and Mullins (1988), Venkantesh and Chiang (1986), Healy and Seifert (1992), Mande(1994), Jeremy Schultz (2003), Scott Fung and Jayendu Patel (2004) supported that announcement dividend contains of information. This research is a replication from the research of Aharony and Dotan (1994) and try to confirm the observation that reveals fluctuation stock price influences announcement dividend in the form portfolio unexpected earning company in the future. Population of this research is all companies that are listed on the LQ'45 in Jakarta stock exchange period 1999-2004. The reason of using period 1999-2004 is coincident with politics events general election that probably influences financial position in Jakarta stock exchange. The research also confirms the Scott Fung and Jayendu Patel (2004) theories where future profitability tends to be influenced by firm's characteristic, long-term growth, and firm valuation. The result of this research shows announcement dividend changes do not significantly influence fluctuation company profitability. However, this research indicates that announcement dividend contains any information to market. The Hypothesis "informational content of dividend" can be accepted. This research proves new evidence about this hypothesis and it seems that fluctuation dividend is more influenced by company profitability in the next period with conduction dividend announcement. This indicates that fluctuated dividend gives a picture of chances company profitability in the future. It seems the liquidness of LQ'45 relates to their regularly dividend announcements, the increasing (decreasing) future unexpected earning is influenced by amount of their dividend regular announcements. Key Word: unexpected dividend change, future unexpected earnings, and information content of dividend.