Articlegold2016

Stock Price Volatility and Role of Dividend Policy: Empirical Evidence from Pakistan

55 citations0/0 files storedInternational Journal of Economics and Financial Issues

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Corporate Finance and Governance Financial Markets and Investment Strategies Financial Analysis and Corporate Governance

Abstract

Despite years of empirical research, the linkage between dividend policy and stock price volatility (SPV) remains controversial among the researchers and scholars. This research endeavors to figure out the relationship between SPV and dividend policy of listed companies in Pakistan. A sample of 50 firms, based upon consistent dividend paying behavior, listed on Karachi Stock Exchange (KSE) has been selected from non-financial sectors, for the period of 2005-2012. Multiple regressions analyses have been carried on by applying random effect model on panel data i.e., for empirical estimation and robustness, panel estimated generalized least squares methods is used for finding relationship between dividend policy (dividend payout [DP] and dividend yield [DY]) and SPV after controlling for firm size (FS), asset growth (AG), long-term debt (LD), earning volatility (EV) and earnings per share (EPS). The study has found significant negative relationship between SPV and dividend policy variables i.e., DP and DY. Study has also found significant positive relationship between control variables (AG, EV and EPS) and SPV in KSE. But in case of the remaining two control variables i.e., FS and LD, these were found to be negatively related to SPV. The findings of this research are expected to contribute to dividend policy literature by providing evidence from Pakistani stock market to prior studies done in developed and developing countries

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References

1984Corporate financing and investment decisions when firms have information that investors do not have 1961Dividend Policy, Growth, and the Valuation of Shares 1991Efficient Capital Markets: II 1988Dividend yields and expected stock returns 1985Dividend Policy under Asymmetric Information 1956DISTRIBUTION OF INCOMES OF CORPORATIONS AMONG DIVIDENDS, RETAINED EARNINGS AND TAXES 2001Disappearing dividends: changing firm characteristics or lower propensity to pay?1979Imperfect Information, Dividend Policy, and "The Bird in the Hand" Fallacy

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