Does dividend distribution policy disclosure create shareholder value?

We examine the value impact of dividend distribution policy announcement made by Indian firms following the mandatory dividend policy regulation 43(A), 2016, of SEBI. Further, we evaluate the changes in information asymmetry around the announcements along with the differential value impact when firms' idiosyncrasies are considered. We employ multiple event study approach to examine the abnormal returns of eligible firms under the regulation post their dividend distribution policy announcements made during 2016-2023. We utilize both parametric and nonparametric test to evaluate differential value impact and also use regression discontinuity design (RDD) to assess the impact of these announcements on information asymmetry. The findings reveal that dividend distribution policy announcement decreases shareholder value by 1.20%, on average. We find that dividend-paying firms experience a more significant negative impact from such announcements than non-dividend-paying firms, while companies capable of paying dividends show more significant negative impact compared to incapable to pay firms. Further, we find that the value impact of such announcements is severe for smaller firms, firms with smaller board size, firms in more competitive industries and for manufacturing firms compared to their counterparts. Our RDD results reveal no decrease in information asymmetry post DDP announcements. Our study is possibly the first to report the value impact of dividend distribution policy disclosure.