Dividend Policy and Share Price Volatility: A Study on Dhaka Stock Exchange

Abstract

This study investigates the impact of dividend policy on stock price volatility based on 11 years’ (from 2004 to 2014) data collected from 35 manufacturing companies listed in Dhaka Stock Exchange (DSE) of Bangladesh. Secondary data, collected from the archive of DSE and records of the companies, were used in this study. Correlation and multiple regression analysis were used to analyze the association between share price volatility and two main measurement variable of dividend policy (dividend yield and dividend payout). Primarily regression model was expanded by adding control variables including size, earning volatility, and debt. The findings of the study suggest that, among predictive variables, dividend yield and size of the firm have major impact on share price volatility, as the research found the significant inverse relationship of share price volatility with both these variables (dividend yield and size of the firm).

Keywords: Dividend Policy; Share Price Volatility; Dividend Yield; Dividend Payout; Earnings Volatility; Debt

Australian Academy of Accounting and Finance Review, vol 4, issue 3, July 2018, pp 89-99