An Analysis of the Effect of Dividend Policy on Stock Price Volatility of Listed Companies on the Lusaka Securities Exchange

Karen Kapotwe Kapundu and Austin Mwange
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Karen Kapotwe Kapundu: University of Zambia
Austin Mwange: University of Zambia

African Journal of Commercial Studies, 2026, vol. 7, issue 3

Abstract: This study analyzed the effect of dividend policy on stock price volatility of firms listed on the Lusaka Securities Exchange, focusing on dividend yield, dividend payout ratio, and earnings per share as key determinants. Stock price volatility is a critical indicator of market stability, investor confidence, and financial decision-making, particularly in emerging markets where information asymmetry and economic uncertainty are prevalent. The study was guided by three objectives: to examine stock price volatility, analyze dividend policies, and evaluate their effect on volatility. A quantitative research approach was employed using secondary data from financial statements of 10 listed companies over a twenty-one-year period. Firms were sampled using a one-stage cluster sampling technique, and data were analyzed using descriptive statistics, correlation analysis, and fixed-effects panel regression models. Diagnostic tests for autocorrelation, heteroskedasticity, and normality ensured robustness and reliability. Findings indicate that stock price volatility is relatively high with frequent short-term fluctuations. Dividend yield was relatively stable, reflecting firms’ efforts to maintain consistent returns and signal financial stability, whereas dividend payout ratios and earnings per share exhibited significant variability, highlighting inconsistencies in profitability. Regression results revealed that dividend yield and payout ratio do not have statistically significant effects on stock price volatility. In contrast, earnings per share has a statistically significant negative effect, indicating that higher earnings are associated with more stable stock prices. The study concluded that investors rely more on earnings information than dividend indicators. Firms are encouraged to improve earnings stability and align dividend payouts with sustainable earnings, while policymakers should enhance transparency and timely financial reporting.

Keywords: Stock Price Volatility; Dividend Yield; Payout Ratio; Earnings Per Share; Panel Regression (search for similar items in EconPapers)
JEL-codes: C23 G12 G35 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:cwk:ajocsl:2026-033

DOI: 10.59413/ajocs/v7.i3.62

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