Profitability and Stock Price Volatility of Nigerian Listed Manufacturing Companies

Abstract

The crux of this study was to examine the impact of profitability on stock price volatility using earnings yield, return on total asset, dividend yield and dividends per share as proxies for profitability. This study adopted Ex-post facto design. The population of this study consisted of manufacturing companies listed on the Nigerian Stock Exchange (NSE) from which five companies were selected. We found that overall; the profitability proxies combined have significant effect on stock price volatility of the sampled companies. Each of the models revealed that earnings yield, dividend yield and dividends per share have a significant relationship with stock price volatility. It was also observed that return on total assets has no significant relationship with stock price volatility. The study concluded that all variables put together show a positive significant impact on stock price volatility with the most impact from dividend yield and dividends per share. Hence, recommendations were made in the light that investors should invest in companies with well-defined ownership structure and managers should adopt a dividend policy beneficial to shareholders.

Keywords: Profitability, Stock Price Volatility, Earnings Yield, Return on Total Assets, Dividend Yield and Dividends per Share.