7211Afe Corporate Finance | Financial Assessment Answers

1.Calculate three-day return earned by your firm for the period from the day before the announcement continuing through the day after the announcement date; and two-day return earned by your firm for the period from the day of the announcement to the day after the announcement date

1.The financial dividend for Amcor Limited:

Balance Date	Dividend Type	Cent Per Share	dollar per share	percentage change
30/06/2017	Final	29.85	0.2985	1.23%
30/06/2016	Final	28.62	0.2862	0.06%
30/06/2015	Final	28.56	0.2856	5.06%
30/06/2014	Final	23.50	0.235	3.00%
30/06/2013	Final	20.50	0.205	1.50%
30/06/2012	Final	19.00	0.19	1.00%
30/06/2011	Final	18.00	0.18	1.00%
30/06/2010	Final	17.00	0.17	0.00%

2.Depicting the three day return by Amcor Limited after the announcement:

-2.91%

Date	AMC return
1-Sep-17	0.37%
4-Sep-17
5-Sep-17	0.00%
5-Sep-16	2.59%
6-Sep-16	-2.03%
7-Sep-16	0.94%
4-Sep-15	1.43%
7-Sep-15	-2.31%
8-Sep-15	1.07%
1-Sep-14	0.70%
2-Sep-14	-1.83%
3-Sep-14	0.18%
30-Aug-13	0.48%
2-Sep-13	-0.86%
3-Sep-13	1.55%
27-Aug-12	1.35%
28-Aug-12	-1.60%
29-Aug-12	0.27%
26-Aug-11	-1.76%
29-Aug-11	-1.80%
30-Aug-11	0.76%
1-Sep-10	2.97%
2-Sep-10	-1.73%
3-Sep-10	-0.29%

3.Identifying the return provided by All Ordinary Index Australia:

Date	ASX return
1-Sep-17	0.17%
4-Sep-17	-0.39%
5-Sep-17	0.07%
5-Sep-16	0.98%
6-Sep-16	-0.25%
7-Sep-16	0.19%
4-Sep-15	0.24%
7-Sep-15	-0.19%
8-Sep-15	1.63%
1-Sep-14	0.08%
2-Sep-14	0.49%
3-Sep-14	-0.04%
30-Aug-13	0.83%
2-Sep-13	1.03%
3-Sep-13	0.21%
27-Aug-12	-0.08%
28-Aug-12	0.32%
29-Aug-12	-0.12%
26-Aug-11	-0.22%
29-Aug-11	1.47%
30-Aug-11	0.18%
1-Sep-10	1.98%
2-Sep-10	0.80%
3-Sep-10	0.32%

4.The Excess return calculated by subtracting Amcor returns with ASX returns:

Excess return
Date	AMC return	ASX return	Excess Return
1-Sep-17	0.37%	0.17%	0.20%
4-Sep-17	-2.91%	-0.39%	-2.52%
5-Sep-17	0.00%	0.07%	-0.07%
5-Sep-16	2.59%	0.98%	1.60%
6-Sep-16	-2.03%	-0.25%	-1.78%
7-Sep-16	0.94%	0.19%	0.75%
4-Sep-15	1.43%	0.24%	1.19%
7-Sep-15	-2.31%	-0.19%	-2.11%
8-Sep-15	1.07%	1.63%	-0.57%
1-Sep-14	0.70%	0.08%	0.62%
2-Sep-14	-1.83%	0.49%	-2.32%
3-Sep-14	0.18%	-0.04%	0.22%
30-Aug-13	0.48%	0.83%	-0.35%
2-Sep-13	-0.86%	1.03%	-1.89%
3-Sep-13	1.55%	0.21%	1.34%
27-Aug-12	1.35%	-0.08%	1.43%
28-Aug-12	-1.60%	0.32%	-1.92%
29-Aug-12	0.27%	-0.12%	0.39%
26-Aug-11	-1.76%	-0.22%	-1.54%
29-Aug-11	-1.80%	1.47%	-3.27%
30-Aug-11	0.76%	0.18%	0.58%
1-Sep-10	2.97%	1.98%	0.98%
2-Sep-10	-1.73%	0.80%	-2.53%
3-Sep-10	-0.29%	0.32%	-0.61%

5.Evaluating and discussing relevant theory from the findings:

The calculation conducted in the above table mainly indicates the presence of dividend policy method, which could help in understanding the level of impact on share price. Amcor Limited share price changed due to the negative and positive impact on their dividend announcement conducted during September and August. In addition, relevant theories such as information content, signalling element and dividend policy theory is reflected on the share price movement of Amcor limited. The share price of Amcor Limited has effectively changed after the announcement of the dividends on each year, which states the presence of theories information content, signalling element and dividend policy affecting share valuation of the organisation. In this context, researchers stated that with the presence of adequate efficient market hypothesis any additional information is adjusted by the investors, while valuing the share price of the organisation [1]. Moreover, adequate change in share price of the company is seen after the announcement of 2015 dividends, which increased share price of the organisation. On the other hand, decline in dividend during 2016 led to the decline ins share price of the company. This relevantly indicates the presence of information content, signalling element and dividend policy theory.

References

Library Authentication - La Trobe University (2018) Datanalysis.morningstar.com.au.ez.library.latrobe.edu.au https://datanalysis.morningstar.com.au.ez.library.latrobe.edu.au/af/company/dividendhistory?ASXCode=AMC&xtm-licensee=datpremium

Attig, Najah et al, "The Global Financial Crisis, Family Control, And Dividend Policy" (2015) 45(2) Financial Management

Bremberger, Francisca et al, "DIVIDEND POLICY IN REGULATED NETWORK INDUSTRIES: EVIDENCE FROM THE EU" (2015) 54(1) Economic Inquiry

Gulen, Huseyin and Jin Xu, "CEO Option Sensitivity To Dividend Yield And Its Impact On Corporate Dividend Policy" [2015] SSRN Electronic Journal

Michaely, Roni and Meijun Qian, "Stock Liquidity And Dividend Policy: Dividend Policy Changes Following An Exogenous Liquidity Shock" [2017] SSRN Electronic Journal

Ntui, Ponsian Prot et al, "Relationship Between Dividend Policy And Share Price" (2015) 3(3) Archives of Business Research

[1] Ntui, Ponsian Prot et al, "Relationship Between Dividend Policy And Share Price" (2015) 3(3) Archives of Business Research