Stock Market Behavioral Reaction Based on the Failure of Long-Term and Short-Term Decreasing Trends of Corporate Performance Criteria in the Time of Dividend Increase

The aim of this study is to examine the Stock market behavioral reaction based on the failure of long-term and short-term decreasing trends of corporate performance criteria (including earnings per share, operating profit per share, operating cash flow per share and net growth of adjusted assets per share in term of inflation) in the time of dividend increases. For this purpose, six hypotheses are developed and data are analyzed by regression models using Panel data method with fixed effects approach. The sample consists of  301 firms listed in Tehran Stock Exchange for the period from 1991 to 2015. The results show that for performance criteria of earnings per share, operating profit per share, and operating cash flow per share, the market's positive reaction to simultaneous increase of functional and dividend criteria is higher for long-term patterns than short-term patterns. On the other hand, the results indicate that for the performance criterion of changes in net adjusted assets of per share, the positive reaction of the market to simultaneous increase of the functional and dividend criteria is insignificant for long-term patterns and short-term patterns. The results also show that the market reaction to the performance criteria of operating cash flow per share and operating profit per share is higher for short-term patterns than the two other functional patterns. In addition, the results indicate that the market reaction is not the same for long-term patterns and that the market reacts differently to any performance criteria, in contrast to the theoretical foundations.