Proposal EFFECTS OF DIVIDEND ANNOUNCEMENT ON THE REACTION OF STOCK MARKET: EVIDENCES FROM VIETNAM

Abstract Vietnamese stock market is an interesting laboratory to examine the reaction of stock price to dividend announcements due to its taxation regulations. This study examines the stock price response to the dividend announcement and analyzes the impact of firm characteristic factors on the reaction of the stock market. The research sample includes dividend announcements made by 351 companies listed on stocks listed on Ho Chi Minh Stock Exchange (HOSE) for the period 20152018 corresponding to 2016, 2017, and 2018 dividends announcements, this period is the most recent stability of tax rates applicable to stock trading and dividends for investors in Vietnams stock market. The research method is carried out with two combined parts: traditional event study methodology and regression analysis of firm characteristic factors affecting the cumulative abnormal returns. This study expects to find the relationship between dividend announcement and stock price on the stock market and show the level of influence on the Vietnamese stock market for the increase dividend announcements, neutral dividend announcements and decrease dividend announcements. Keywords: stock market reaction, dividend announcement, Vietnam stock market

Vietnamese stock market is an interesting laboratory to examine thereaction of stock price to dividend announcements due to its taxationregulations This study examines the stock price response to the dividendannouncement and analyzes the impact of firm characteristic factors onthe reaction of the stock market The research sample includes dividendannouncements made by 351 companies listed on stocks listed on Ho ChiMinh Stock Exchange (HOSE) for the period 2015-2018 corresponding to

2016, 2017, and 2018 dividends announcements, this period is the mostrecent stability of tax rates applicable to stock trading and dividends forinvestors in Vietnam's stock market The research method is carried outwith two combined parts: traditional event study methodology andregression analysis of firm characteristic factors affecting the cumulativeabnormal returns This study expects to find the relationship betweendividend announcement and stock price on the stock market and show thelevel of influence on the Vietnamese stock market for the increasedividend announcements, neutral dividend announcements and decreasedividend announcements

Keywords: stock market reaction, dividend announcement, Vietnam stockmarket

Table of Contents

List of Tables iii

List of Figures iv

CHAPTER 1 INTRODUCTION 1

1.1 Research Background 1

1.2 Research questions and objectives 4

1.3 Significance of the Study 4

CHAPTER 2 LITERATURE REVIEW 5

2.1 Theories of reaction of stock market to dividend announcements 5

2.1.1 Signaling theory 5

2.1.2 The theory of free cash flow 6

2.1.3 Customer effect theory 7

2.1.4 Efficient Market Theory 8

2.2 Emperical Literature 9

2.3 Institutional Environment of Vietnamese Stock Market 13

2.4 Hypotheses development 14

CHAPTER 3 METHODOLODY 19

3.1 Conceptual Framework 19

3.2 Research Design 20

3.2.1 Analysis of Abnormal Return 20

3.2.3 Analysis of firm characteristic variables 23

3.2.4 Testing hypotheses 24

3.3 Sampling Design 27

3.4 Data collection 27

Reference 28

List of Tables

Table 2.1 Vietnam tax policy on dividends and capital gains from 2008 to

2014 14

Table 3.2 Describe the variables used in the regression model 23

Table 3.3 List of methods used for each hypothesis 26

Table 3.4 Total Dividend Announcements from 2016 to 2018 27

List of Figures

Figure 2.1 Vietnam Stock market capitalization (in dollars) 13Figure 3.1 Research framework 20

CHAPTER 1 INTRODUCTION

1.1 Research Background

The stock market, with its continuous development, is an effective channel

to raise capital for businesses and an investment method favored by manyinvestors because of its convenience, profitability, and liquidity Along withraising capital, businesses must also ensure the rights of theirshareholders through the annual dividend distribution Not only is thedecision to allocate returnsto shareholders, but it is also a basis forchanges in investor behavior as well as a channel for transmittinginformation from corporate governance to the market Therefore, in thestock market, the period of announcing the annual dividend payment isalways the time that investors are interested in and the fluctuation ofstock prices during this period is also relatively large

For nearly 60 years from the background studies of dividends by Lintner(1956), Miller and Modigliani (1961), the topic of dividends has alwaysbeen an urgent issue, a category that is still in its infancy and always agreat question for researchers Although there have been many studies,many theories of dividends have been published such as the signalingtheory of Bhattacharya (1979), the theory of representation costs ofEasterbrook (1984) or the theory behavior of Shefrin and Statman (1984).This study focuses on research to find out the relationship between thefluctuation of stock prices and the volume of stocks and the dividendnotification of the business Built on the basis of an event analysis model,the standard model is used to analyze the reaction of the stock market toactivities such as dividend notifications, stock splits, and corporate rightsissues In the world, most of the research on the same topic is done on thebasis of some of the above mentioned topic, typical studies such as Petit(1972), Watts (1973), Dasilas et al (2011) and Kumar (2017)

An outside investor usually has less information than an insider, in other words, there isinformation asymmetry between them Thus, one of the explanations for the effect of the

dividend increase announcements that cause positive stock price reactions is based on theinformation asymmetries in the market It is explored that the dividend increaseannouncement as a manager’s signal of the firm’s future prospects due to informationasymmetries Managers are reluctant to cut dividends because an increase in dividendpayment is a positive signal that informs the market that the company not only has asuccessful business, a high current income, and an increasing stock price, but also good futureearnings A decrease in dividend payment may signal poor future performance or the inability

of the company to maintain a given level of dividends in the future Managers can use thedividend increase as a signal to communicate their future earnings forecasts Therefore, theannouncements of dividend increase transfer positive information to the market as well asreflect the firm’s good prospects for the future In other words, an announcement of anincreased (decreased) dividend payment is good (bad) news for the market and leads to thestock price increases (decreases)

Jensen (1986) demonstrated that due to the conflict of interest that may occur betweenshareholders and managers, especially when the company has substantial free cash flows, themanagers can increase dividend to resolve the agency problem That is, an increase individend payments might be a way to reduce the conflict of interest between managers andshareholders regarding a firm with free cash flows

In contrast, it is showed that in a perfect market where there is no tax, no transaction costs,and no information asymmetry between managers and shareholders, dividends do not impact afirm’s value and that dividend policy does not affect stock price Thus, a dividend increaseannouncement will not cause a stock price reaction However, taxes and transaction costs doexist in practice; for example, the dividend tax rates of the US are between 10%-35%, inCanada tax rates are between 2.08%-19.58%, in England they are between 10-32.5%, inGermany the tax rate is 25%, in Holland the tax rate is 15%, and in Vietnam is 5% Also,there is asymmetric information between shareholders and managers in the market

In the world, the research topic on the reaction of the stock market beforedividend notice has received much attention from investors Researchers,however, the majority of studies are done in the US while studies indeveloping countries are still very few The majority of the research wasconducted based on an event date methodology to check the market'sreaction to news announcements In addition, a number of other studies,mainly in the US market, focus more on the research of factors that

influence the market's reaction to news announcements This study willpresent a summary of typical studies, important results used in this studyand some previous studies The first studies started in the United Statesand was followed by research in developing countries

In Vietnamese stock market, insider trading transactions were introduced

in the Security law 2006 However, until the Security law 2010 was issued,the sanctions for insider trading were stipulated in the Decree85/2010/ND-CP with “a fine of between VND 150,000,000 and 200,000,000shall be imposed on an individual or institution” In addition, according toVietnam criminal law the maximum sanction for this crime is 7 years inprison Although, the sanctions for insider trading are less serious thanthose in developed market, there are only a few of cases detected andfined Even, individuals and institutions are willing to be fined to conductinsider trading transactions

In Vietnam, the research on this topic was conducted by Trung and Dat (2015) and showed asignificant positive effect of dividend notification on changes in stock prices and tradingvolumes The study was conducted on 233 enterprises listed on HOSE in the period of 2008-

2014, the research results also showed the reaction of investors in Vietnam with dividendannouncement as well as finding that there is significant insider trading before the officialdividend announcement date

This study was conducted with more updated data as well as conductingfurther research to better analyze, find out the impact of business-specificfactors on the level of stock's reaction to dividend announcement throughRegression analysis with the dependent variable as the cumulativeabnormal profit representing the reaction of the general market

The research has some implications and practical implications for manymarket participants For corporate executives, understanding the effect ofdividend payment information on market reactions helps businesses betterrespond to market reactions when they make financial decisions Forinvestors, understanding this effect helps stock investors make the rightdecisions to maximize profits In addition, this study is an empirical test ofeffective market theory, which has practical implications for market

managers in formulating management policies that contribute toimproving explicitness of stock market.

1.2 Research questions and objectives

The objective of this study is to test the reaction of the stock market to theannouncement of corporate dividends as well as to analyze the effect ofthe specific factors of the business on market’s response to dividendannouncements The findings of this research will providerecommendations for investors and regulatory agencies in the market Tothat end, this study proceeds to answer research questions as followings (1) How does the market respond to dividend notices?

(2) Does the market respond effectively to dividend notices?

(3) How do firm specific variables influence the stock price reaction todividend announcement?

1.3 Significance of the Study

The research purpose of this study is to investigate the market response tothe dividend notification represented by cumulative abnormal returnsandfactors affecting the reaction of the market to dividend notice In order toavoid errors affecting research results due to the impact of tax changes,the scope of this study will be done on stocks listed on the Ho Chi MinhStock Exchange (HOSE) and the period of 2015 - 2018 corresponding tothe dividend announcements of the financial years of 2015, 2016, 2017,which is the latest period of stability in the tax rate applicable to stocktrading and dividends to market investors To ensure uniformity in impactand avoid jamming notifications, this study has built a standard releaseschoose individually tailored, based on the research of Yilmaz (2006) andsome specifics in Vietnam stock market This study was conducted withmore updated data as well as further analysis to find out the impact ofbusiness-specific factors on the level of stock's reaction to dividendannouncement Moreover, this study enriches the academic treasure with

a new empirical evidence from Vietnam, an emerging economy

1.5 Scope of Study

This research focuses on examining how dividend announcements impact

on stock market through stock prices of listed companies on the Ho ChiMinh Stock Exchange The study covers a sample of 403 announcementsfrom 358 companies that declared dividend over a period of three yearsfrom 2016 to 2018

CHAPTER 2 LITERATURE REVIEW

Since the issue of market reaction to dividend notification as well asresearch related to dividends has been conducted, there have been manystudies The study was presented to explain the positive (negative)relationship between the notice of increase (decrease) of dividends andthe abnormal yield of stocks Based on information gathered from theempirical studies that have been conducted, this study introduces threemain theories used in this study to explain the results: signaling theory,cash flow theory and customer effect theory These are the widely knowntheories as well as have been tested by many different experimentalstudies

2.1 Theories of reaction of stock market to dividend announcements

2.1.1 Signaling theory

Signaling theory is one of the most important theories used to explain thereaction of the market to the announcement of corporate dividends Thefoundation of the theory begins with the assumption of Miller andModigliani (1961) that regulators and outside investors are equal and free

as well as sufficient in terms of information However, in realityinformation asymmetry always exists and it is obvious that managers will

be the one who understand best the operation situation as well asdevelopment potential of the company in the future On the other hand,under-position investors who hold less information are always looking forsignals from the business manager for their investment decisions.Therefore in some cases it is necessary to transmit information toinvestors, managers need to use an intermediary to broadcast theselected signal and dividends On that basis, signaling theory suggeststhat an increases dividends announcement will bring clear signalstransmitted by managers about the bright prospects of future businesses

to investors in the market (Bhattacharya, 1979)

Subsequently, the study of Bhattacharya (1979) found that for eachincrease (decrease) of dividends, there is an increase (decrease) inresponse to the future value of the firm and from there an overview of thesignaling theory incurred Research shows that, in imperfect marketconditions, dividends are the signals of expected future cash flow As anexpensive measure to limit the information asymmetry between managersand shareholders of the company, these notices pay more dividends as asignal to shareholders that cash flow and profit the profit the companyachieves in the future will increase enough to meet that increase

Some later studies that support this theory, such as John and Williams(1985), Asquith and Mullins (1986), also believe that dividend changes alsocarry information similar to a change in profits The research results showthat managers, who hold the most information about the business, will usethe increase in dividends as a signal to let people know that the business

is under real value However, in some cases the signaling theory is proved

to be inaccurate because it is not easy to detect whether the purpose ofmanagers' information transmission is real or not

2.1.2 The theory of free cash flow

The second theory used in the study to explain the relationship betweenthe change of dividend notice and abnormal profit is the theory of freecash flow This theory follows from the theory of Jensen and Meckling(1976) on representation costs Accordingly, Jensen and Meckling (1976)said that the problem of representation of enterprises occurs primarilybased on the reason is the separation between the owner and themanager This theory is based on the conflict of interest of owners andmanagers as well as information asymmetry between managers andshareholders of the business

The free cash flow theory was then put forward by Jensen (1986) thatstates that managers prefer the abundant free cash flow in businesses and

do not want to face the risk of bankruptcy due to liquidity loss So they areonly reluctant to pay dividends to shareholders The decision of managers

to keep free cash flow in the business will easily lead to overinvestment

and inefficiency In addition, keeping cash levels high can be used bymanagers for their personal gain Therefore, dividends will be one of theways to cut free cash flow in the business as well as cut costs due to theissue of representing the company

According to Jensen (1986), dividends are used as a mechanism tosupervise and monitor managers rather than directly interfering withshareholders to regulators As a result, paying more dividends will givegood news about the agency costs being cut, as well as the ineffectiveinvestment in bad projects that may not be happening in the future hybrid.Managers' notice of paying more dividends will make free cash flow undermanagement, their performance is reduced, which implies that thecompany's operations will be better in the future

Rozeff (1982) and Easterbrook (1984) also provided support for free cashflow theory Accordingly, they said that the representative cost of thebusiness can be reduced by increasing the dividend payment toshareholders Businesses paying more dividends often need to use othersources of capital from the market for their investments This helps theoperation of the business and is monitored by a third party, thus avoidinginefficient investments However, the research also suggests that the freecash flow theory is similar to the signaling theory when it is assumed thatdividend changes will convey information to the market The differencelies in information transmission, if the signal theory is information aboutchanges in future profits, the theory of free cash flow informationtransmission is the behavior of managers

2.1.3 Customer effect theory

The third theory used to explain the relationship between dividendchanges and abnormal returns is customer effect theory The customereffect theory states that there are two main groups of investors in themarket: the group of customers who prefer the profit of the business to bepaid to shareholders in the form of dividends and the other grouppreferred to keep returnsback in the business Similarly, every business inthe market with different dividend policies tries to attract different types of

customers These two groups of customers are mainly based on thedifference in tax rates on the dividend income they incur

Investors who do not receive a tax incentive on dividend income will preferthe firm's returnsto be retained for reinvestment rather than dividends Atthat time, the announcement of an increase in dividend would beconsidered bad news for this group of investors because they will have topay more taxes in the future In response, investors will sell more shares

to avoid tax and choose companies that pay no dividends or pay lessdividend instead This tax preference was developed and presented as atheory related to the tax preference effect of customer groups by Millerand Modigliani (1961) and Black and Scholes (1974)

Conversely, investors who prefer high dividends may be due to their taxexemptions or other reasons that will pay more attention to the dividendrate of the business Typical of this group are retirees, pension funds orinstitutional investors The study of Eckbo and Verma (1995) and the study

of Short (2002) have shown a positive relationship between dividendpayment and the appearance of institutional investors for the investorgroup This is usually subject to a relatively low dividend income tax Thereduction of dividends can be considered as an undesirable event for thisgroup of investors, who expect businesses to pay more dividends andvalue dividend income

In addition, the third group can be referred to as people who areindifferent to the dividend announcement, the group of investors who buystocks for their main purpose is not dividends but other purposes such asacquiring and taking control of the company

Because of the simultaneous appearance of many groups of investors inthe market, therefore, with each change of dividend policy will affect andchange the ownership structure of the company Therefore, managersneed to clearly identify their current group of investors avoiding unsuitabledividend decisions for the majority of investors that adversely affect thestock price of businesses

In relation to market response studies before the announcement of

dividends, customer effect theory is used to explain the impact of firm'sdividend rate on response intensity of the market Specifically, in the study

of Bajaj and Vijh (1990), the results show that for firms with high dividendrates in which most investors prefer dividend dividends, the reaction ofprices is the same Stocks prior to the dividend announcement will belarger than the rest of the business

In explaining the relationship between the abnormal yield of a stock andthe dividend announcement, this theory answers the case when themarket responds positively to any dividend notice In other words, whenthe enterprise pays more dividends, the market will react in the samedirection to it and in the remaining cases, even if the dividend ratedeclines, the abnormal profit from the stock is not subject to it Negativereaction from the market The reason given is because the taxable income

is lower than the dividend income, so investors will want to keep the profit

in the business Therefore, the price of the stocks that announced lessdividend payment still received a positive response from this group ofinvestors

2.1.4 Efficient Market Theory

The efficient market hypothesis proposed by Fama (1965) assumes that stock price at anypoint in time is a good estimate of its intrinsic value He went ahead to state that for anefficient market, stock prices will quickly adjust to reflect all available information.According to Khoury (1983), the efficiency of a market can be tested by measuring the ability

of the market to anticipate new information and how quickly it adjusts to such information

In a seminal paper by Fama (1970), he went ahead to categorise efficient markets into threeforms, namely; weak, semi-strong and strong form A market is weak efficient when currentprices fully reflect all past information The weak form therefore suggests that an investmentstrategy that is based on a company’s past information cannot yield abnormal returns for theinvestor The semi- strong form of market efficiency proposes that current prices reflect allpublicly available information hence by trading on publicly available information, investorsshould not be able to gain abnormal returns The strong form of market efficiency states thatall privately and publicly available information are reflected in the current stock price

Fama et al (1969) carried out a study to investigate the efficient market hypothesis Theirresults from examining the effect of stock split announcement on share prices on the NewYork Stock Exchange from 1927 to 1959 revealed that stock prices adjust rapidly to theseannouncements, indicating a semi strong efficient market Reviewing over 163 articles on theefficient market hypothesis, Sewell (2011) found that 50% of the articles he reviewed were insupport of Efficient Market Theory with the other 50% contradicting it.

2.2 Emperical Literature

In the world, the research topic on the reaction of the stock market beforedividend notice has received much attention from investors Researchers,however, the majority of studies are done in the US while studies indeveloping countries are still very small The majority of the research wasconducted based on an event date methodology to check the market'sreaction to news announcements In addition, a number of other studies,mainly in the US market, focus more on the research of factors thatinfluence the market's reaction to news announcements and testingbackground interrelated theories using multiple models Statistics, differentregression Therefore, to get the most overview of related studies, thisstudy will present a summary of typical studies, important results used inthis study and some previous studies The first studies started in theUnited States and was followed by research in developing countries

Preliminary research on stock market reactions to dividendannouncements conducted in the US by Petit (1972) The results of thestudy have shown that each positive (negative) change in the dividendrate will correspond to it being a positive (negative) change in theabnormal yield of that stock However, Watts (1973) later conductedsimilar research in the US market but denied the results

Petit (1972) conducted a study based on the monthly data set of 625companies listed on the NYSE from January 1964 - June 1968 and the dailydata set of 135 news announcements from 1967 to 1969 With its data,the study observes changes in stock prices over 6 months and 6 daysaround the official dividend announcement The research results indicate

that the market has used the information from the dividend guarantee tostock prices, as each change in dividend is reported to have a positiveimpact on the price On the stock market, this result is reliable with bothmonth and day data sets Research suggests that corporate managers willonly make decisions to increase dividends when there are thorough cashflow plans because they know that dividends next year if not paid or lowerwill be strongly affected to the company's stock price In addition, hepointed out that the use of dividend notices is a means to conveyinformation that is not effective because it does not really reflect thefuture prospects of the company

Watts (1973) then conducted research on 310 enterprises that satisfiedtheir criteria from 1945 to 1967 with the original purpose to check forhidden information in dividend notice according to signaling theory With abroader 24-month watch frame Around the date of dividend notice [- l; +12], Watts negates the outcome of Petit (1972), by examining theassociation between dividend changes, abnormal gains future and suddenincrease in returnsof stocks The results show that, in general, changes inshare prices and changes in dividends are positively related, but thisrelationship is insignificant because of the returnsfrom the use of dividendinformation to make investment unable to offset the transaction costs to

be paid

From the controversy, many subsequent studies were conducted in the US

to find the final conclusions on the reaction of stock prices to corporatedividend announcements and whether or not the dividend notice containsinformation about the future prospects of the business or not Kwan(1981), Woolridge (1983) then conducted research in the period of 1973 -

1977 and the results also showed a positive relationship between thechange of dividends and the price of securities in the market Subsequentstudies were conducted in the United States but with a changingtimeframe and patterns, some prominent names include Bajaj and Vijh(1990), Akhigbe, Stephen and Madura (1993), Denis (1994), Bernheim andWantz (1995), Below and Johnson (1996), Goldstein and Fuller (2003), Lee(2003), Docking and Koch (2004), Tsai and Wu (2015) Accordingly, most

of the results supported the study of Petit (1972) as well as signalingtheory.

Kwan (1981) conducted research and checked the inside information of

183 regular dividend notices and abnormal years of listed companies onNYSE from 1975 to 1971 Observed within the 41-day timeframe aroundthe dividend notice - 15; + 251, empirical research results find a completesupport for the study of Petit (1972) and think that the relationshipbetween dividends and earnings in the future is significant Woolridge(1983) expanded the study when conducting research on the dividendnotification of 225 firms on NYSE between 1973 and 1977 through periodiccomparative research With a more focused view, 21 days around the date

of dividend notification [- 10;+ 10], he examined the impact of dividendchanges on stock prices and found that with dividends If the priceincreases, the stock price will have a positive change and vice versa, whenthe dividend rate decreases, the stock price votes are also affectedaccordingly The main reason he explained for the above link was mainlybased on signaling theory

Bajaj and Viji (1990) conducted their research on The Center Research inSecurity Prices (CRSP) from 1962 1987 with over 8500 dividend changenotices The study shows that there exists a positive relationship betweenthe change of stock prices before the change of dividends or in otherwords, the increase (decrease) of the announced dividend rate isaccompanied by the impact positively (negative) on stock market Byanalyzing the reaction of the market on many different stock groups, thestudy shows that the dividend rate of stocks is one of the important factorsaffecting the intensity of the correlation According to the study'sargument, based on customer effect theory, the research suggests thatdividend-preferred investors tend to select stocks with higher dividendrates and their response first The change in dividend notice is alsostronger than stocks with low dividend yield Specifically, compared tostocks with low dividend rates, those stocks with high dividend ratesincrease prices more strongly before the notice of dividend increase andthe deeper decrease before the notice of dividend reduction Besides, the

impact of dividend rate is even stronger on low price stocks, smallbusinesses that, according to the research, could be explained by the lack

of information of this group of stocks Therefore, dividend notices areexpected and expected more by investors

Denis (1994) conducted a retest of the various theories that were used toexplain the positive relationship between the announcement of dividendchanges and the response of stock prices on more than 6700 observationsfrom 1962 - 1988 in the USA In general, the results obtained areconsistent with cash flow signal theory and customer support signaltheory Specifically, the study found that the abnormal returns of the stockwithin two days of the dividend announcement date changed in the samedirection as the announced dividend change and the stock's dividend rate,although however, it has no relation with the coefficient of Tobin's Q Inaddition, the study conducted a test, although it did not eliminate thetheory of free cash flow, but the study suggested that this was not anappropriate explanation for the internal transmission of dividendinformation

Lee (2003) conducted research on the dividend notices of all firms listed

on The New York Stock Exchange (NYSE), American Express (AMEX) andNational Association of Securities Dealers Automated Quotation System(NASDAQ) from 1975 to 1996 Empirical results of the research indicatethat the signaling theory of dividends appears to be relatively weak andmixed Through the study, the author has proposed a new research modeland shows that dividend information is not always informed about thefuture of the business The model created distinguishes the two types ofdividend change and predicts that the market will react more strongly only

to dividends with future-related changes In addition, the study alsopointed out that dividend rates and changes in stock risks are alsoproposed to explain the reaction of the market with dividend notice.Accordingly, the dividend rate and abnormal profit cumulative in the threedays after the announcement of dividends have a positive (opposite)relationship to the decisions to increase (decrease) dividends However,the change in stock risk does not explain the market reaction to dividend

notices in the research sample

Tsai and Wu (2015) conducted research on data from CRSP with cashdividend notices of companies from January 2005 - December 2012 anddata on bond transactions from TRACE to compare the response of thecorporate bond market and the stock market's reaction to the company'sdividend notice By observing market reaction to dividend and bondnotices within 10 days [8; + 8] around the notice date combined withregression analysis, the results show that the relationship between thechange of dividends and future returnsis relatively weak However, thereaction of the stock and bond markets on the day of informationdisclosure seems to provide information about the company's profit thefollowing year

Dasilas (2011) also conducted event studies combining similar regressionresearch for companies listed on The Amman Stock Exchange (ASE).Although the results were positive, there were some differences compared

to other studies due to the specific conditions of Greece With a one-timedividend payment policy, a number of laws restricting dividends and most

of the leaders are on the board of the business, it is not necessary to usethe dividend notice as a method to transmit information out Overall, thestudy also supports this relationship as the results show that the marketalways has significant responses to the company's dividendannouncement

Trung and Dat (2015) were the first to conduct research on the abovetopic in Vietnam when conducting the examination of the impact ofdividend notification on stock prices and volume of the above enterprises

in Vietnam stock exchange Observation results 11 days [- 5; + 5] aroundthe dividend announcement of 233 companies listed on the HOSE in theperiod 2008 - 2014, it shows that even though the announcement ofdividends is increased, unchanged or reduced, it has a positive impact onthe stock price and trading volume, in which stock prices and tradingvolume will increase most sharply when the dividend rate increases Inaddition, the study found evidence for insider trading before the official

dividend date

Kumar (2017) then also conducted a study on the above topic in India with

a wider scope of 4868 dividend notices from businesses listed on NationalStock Exchange of India (NSE) 2012 - 2014 With observation on 11-daytime frame [- 5; + 5] around dividend notice, research shows that theannouncement of an increase in dividends will cause the stock price to go

up while the stock price will decrease accordingly when the announceddividend is reduced In the case of constant dividends, the results showthat there is a slight but negligible stock price decrease Besides, byregression analysis with cross-year data, the study also shows that theinformation hidden in dividends has a non-linear relationship with theownership ratio of the founders in accordance with the theory ofrepresentation costs

2.3 Institutional Environment of Vietnamese Stock Market

As shown on figure 2.1, the World Bank provides information of stock marketcapitalization for Vietnam from 2008 to 2018 The average value for Vietnamduring that period was 57.52 billion U.S dollars with a minimum of 12.37billion U.S dollars in 2008 and a maximum of 132.65 billion U.S dollars in

2018