Impact of Dividend Policy on Share Price Volatility

Abstract

The aim of this investigation is to study the association of dividend policy with share price volatility by resting the focal point on all the listed corporations in Pakistan Stock Exchange (PSX). In support of mentioned objective, top 10 companies listed in Pakistan Stock Exchange (PSX) was selected as sample. The study covered a time span from 2007 to 2016. The association connecting share price volatility with dividend policy specifically determined by six (6) independent variables i.e. dividend yield, dividend payout, firm’s size, firm’s growth, earning volatility and leverage. These were investigated by employing regressions analysis under the method of least squares model. On the bases of findings of this study, all independent variables have significant impact on share price volatility, which shows that firms which pay regular dividend to its shareholders are more stable in their stock price.

Keywords: Dividend payout, Dividend yield, Earning per share, Firm’s growth, Firm’s size, Leverage, Share price volatility and Pakistan Stock Exchange.

JEL Codes: G35, G11