The Effect of Cash Subsidies on the Stock Price and Make Abnormal Return for Oil Products Industry

Stock Exchange is an organized and official market for buying and selling companie's shares base on its own rules and laws. Many factors affect the views of the market parties and the company's stock price. Some of these factors are internal and partly due to factors outside the domestic economy. Paying subsidies is one of the important instruments that influence economic variables with a change in relative prices. In this paper we examine the impact of paying subsidies on the stock price and make abnormal return for oil products industry. Five companies in Tehran Stock Exchange have been selected as a sample. Financial information of these companies were collected from 2008 to 2013.Date of Cash subsidies were considered as independent variablesand creating unusual return and cumulative abnormal return was considered as dependent variables and an indicator for market reaction. The cumulative average abnormal returns compared and tested by Use of Event Study and statistical test (test t). The results showed that there is no significantdifference between the abnormal return on the stock for oil products industry before and after the payment of subsidies. On the other hand, the results showed that there is a significant and meaningful difference between average cumulative abnormal return before and after of cash subsidies.